Taxpayers can use Schedule C-EZ only if they:

• Had business expenses of $5,000 or less
• Used the cash method of accounting
• Did not have an inventory at any time during the year
• Did not have a net loss from their business
• Were the sole proprietor for only one business
• Had no employees during the year
• Were not required to file Form 4562, Depreciation and Amortization
• Did not deduct expenses for business use of their home
• Did not have prior-year unallowed passive activity losses from their business

	The cash method of accounting reports income when received and expenses when paid, as opposed to the accrual method, which reports income when earned and expenses when incurred. Taxpayers may be required to file Form 4562 if they are claiming depreciation or amortization or reporting information on listed property. To find out if a taxpayer must file Form 4562, see the Instructions for Schedule C, line 13.