Profit or Loss From Business
This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
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, or Form 1040NR, 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.
Deduction for qualified clean-up costs.
You may be able to deduct
50% of amounts paid or incurred for the removal of debris or demolition of structures located in the Gulf Opportunity (GO)
Zone. See
GO Zone clean-up costs on page C-8.
Increased expensing for qualified timber property.
For qualified timber property you own in the GO Zone, the Rita GO Zone, or the Wilma GO Zone, the limit on expensing
reforestation expenditures is
increased by up to $10,000. See
Forestation and reforestation costs beginning on page C-7 and Pub. 4492.
Increased section 179 limits for GO Zone property.
You may be able to take an increased section 179 deduction for qualified GO Zone property you placed in service in
2006. For information, see Pub.
946.
Additional depreciation allowed for qualified property.
If, during 2006, you placed in service qualified property in the GO Zone, you may be able to claim additional depreciation
deductions. See
Pub. 946 for more information.
Amortization of expenses incurred in creating or acquiring music or music copyrights.
Beginning in 2006, if you placed in service any musical composition or copyright with respect to a musical composition,
you may elect to amortize
the expenses incurred over a 5-year period. See Pub. 946 for more information.
Employee retention credit has expired.
This credit was available for qualified wages paid before January 1, 2006.
Clean-fuel vehicle and refueling property deductions have expired.
These deductions were available for property placed in service before January 1, 2006.
Indian employment credit has expired.
This credit was available for qualified wages paid before January 1, 2006.
At the time these instructions went to print, Congress was considering legislation that would extend the Indian employment
credit that expired at
the end of 2005. To find out if this legislation was enacted, and for more details, go to
www.irs.gov, click on More Forms and Publications , and then on What's Hot in
forms and publications , or see Pub. 553.
