Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Income — Business; Form 1040, Line 12

Clarifying Taxpayers' Business Income and Expenses

Schedule C Situations that Raise a "Red Flag"

As a volunteer preparing a tax return with Schedule C/C-EZ, watch for examples of incorrect, incomplete, or inconsistent information, such as:

  • Schedule C/C-EZ income in round numbers
  • Schedule C/C-EZ cash businesses as the only income on a return claiming EIC
  • Schedule C/C-EZ with little or no expenses when expenses would be expected
  • Schedule C/C-EZ taxpayers with little or no records for income and expenses
  • Any Schedule C/C-EZ income that brings the taxpayer to the maximum EIC
  • Schedule C/C-EZ without a Form 1099