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taxmap/instr/i1040sc-000.htm#TXMP00ae32f9 Profit or Loss From Business

2006

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.

taxmap/instr/i1040sc-000.htm#TXMP2f584229 What's New

taxmap/instr/i1040sc-000.htm#TXMP5e5cb777 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.

taxmap/instr/i1040sc-000.htm#TXMP646394e7 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.

taxmap/instr/i1040sc-000.htm#TXMP4393a380 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.

taxmap/instr/i1040sc-000.htm#TXMP37a71e40 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.

taxmap/instr/i1040sc-000.htm#TXMP467c7e05 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.

taxmap/instr/i1040sc-000.htm#TXMP477943ad Employee retention credit has expired.

This credit was available for qualified wages paid before January 1, 2006.

taxmap/instr/i1040sc-000.htm#TXMP315e81a4 Clean-fuel vehicle and refueling property deductions have expired.

These deductions were available for property placed in service before January 1, 2006.

taxmap/instr/i1040sc-000.htm#TXMP09aa271b 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.

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