=============================================================== TODAY'S TIP: SELF-EMPLOYED INCOME Gracie writes, "In order to earn a little extra money I do surf the Web and click for pennies on the Internet... I was wondering if I should report that on Schedule C, so I could write off the expense of the Internet?" In this situation, Gracie is considered a sole proprietor and has self-employment income. We'll cover the basics of filing as a sole proprietor in the next two tips. You are a sole proprietor if you are the sole owner of a business that is not a corporation or partnership. Report your income and expenses from your sole proprietorship on Schedule C Form 1040, Profit or Loss From Business, or on Schedule C-EZ Form 1040, Net Profit From Business. You may use Schedule C-EZ to determine your net profit if you have only one sole proprietorship and you meet all the requirements listed in Part 1 of Schedule C-EZ. If you can use Schedule C-EZ, gross receipts from your business and total expenses are reported in Part II. The difference between gross receipts and total expenses you reported is your net profit. Report Net profit on line 12 of your Form 1040. You cannot use Schedule C-EZ if your business expenses were more than $2,500, your business used the accrual method of accounting, you deducted expenses for the business use of your home, or if you had employees, a net loss, or inventory. If you cannot use Schedule C-EZ, you must report your business income and expenses on Schedule C. And, if you have more than one sole proprietorship business, or if you and your spouse have separate businesses, you must use a separate Schedule C for each business.
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