Money Buzz 01/05
Filing a tax return just got a lot easier for many small-business owners. A change in IRS regulations recently doubled the dollar limit on expenses allowable on Schedule C-EZ, a simpler version of the Schedule C form ("Profit or Loss From Business"), for the 2004 tax year.
Raised from $2,500 to $5,000, the new limit will enable some half a million more small businesses to use the simpler form, reports the IRS. "With the C-EZ, you don't have to itemize expenses-you can put a single figure for all your expenses up to $5,000," explains , CPA, certified financial planner and president at Bart L. Fooden & Associates in Woodbury, New York. He says the form is significantly easier to prepare. "Insurance interest, office expenses and rent can all be lumped together. The only expenses you need to itemize are meals, entertainment and car expenses."
Expenses, however, aren't the only eligibility consideration for the form. "It can't be used to report a loss, claim expenses on an office in the home or [report] depreciation," notes Fooden. "You must also be a sole proprietor without any employees whom you pay regular wages to."
What's more, even when a Schedule C-EZ is permissible, it isn't always ideal, says Fooden. "If you take a C-EZ to a bank as part of your application, they'll say, 'Where are all the details?'" he says. "Banks like to see itemized expenses. So if you're thinking about a bank loan, you might be better served with the Schedule C."