2004 HTML Instructions for Schedule C (Form 1040),

Table of Contents

Introduction

Use Schedule C (Form 1040) to report income or loss from a business you operated or a profession you practiced as a sole proprietor. Also, use Schedule C to report wages and expenses you had as a statutory employee. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business. To report income from a nonbusiness activity, see the instructions for Form 1040, line 21.

Small businesses and statutory employees with expenses of $5,000 or less may be able to file Schedule C-EZ instead of Schedule C. See Schedule C-EZ for details.

You may be subject to state and local taxes and other requirements such as business licenses and fees. Check with your state and local governments for more information.

Section references are to the Internal Revenue Code.

What's New

The maximum amount of business expenses you can have and qualify to file Schedule C-EZ is increased from $2,500 to $5,000 for 2004. For other requirements you must meet, see Schedule C-EZ.

You can use up to four vehicles simultaneously in your business and use the standard mileage rate. For details, see the instructions for line 9 beginning on
page C-3.
For certain business start-up costs paid or incurred after October 22, 2004, you can elect to deduct up to $5,000. This limit is reduced by the amount by which your start-up costs exceed $50,000. Also, the amortization period for certain business start-up costs paid or incurred after October 22, 2004, has been increased to 15 years. For details, see Pub. 535.
You can elect to deduct costs of certain qualified film and television productions that begin after October 22, 2004. For details, see Pub. 535.
You can elect to deduct certain forestation and reforestation costs paid or incurred after October 22, 2004, instead of amortizing them over 84 months. This election does not apply to estates and trusts. Also, the dollar limitation for amortization on certain forestation and reforestation costs paid or incurred after October 22, 2004, has been eliminated. For details, see Pub. 535.

Profit or Loss From Business