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

Income — Business; Form 1040, Line 12 Workout

Completing Schedule C-EZ

Net Profit

Gross Income Less Total Expenses

Line 3, Net profit, is the difference between gross receipts (line 1) and total expenses (line 2). If line 3 shows a profit:

  • Transfer this amount to Form 1040, line 12, and to Schedule SE, line 2 (except statutory employees)

If line 3 is zero:

  • Enter zero on Form 1040, line 12

If net profit is less than $400, enter the amount on line 12 of Form 1040 and attach Schedule C-EZ to the return.

Schedule SE is not required unless there is a profit of $400 or more. The Schedule SE is attached to Form 1040, and discussed in the Other Taxes lesson. Self-employed taxpayers may claim an adjustment to income for part of the social security and Medicare taxes they pay.

If line 3 shows a loss, the taxpayer cannot use Schedule C-EZ and should be referred to a professional tax preparer.

Schedule C-EZ Part II, lines 1-3.
Form 1040

Form 1040