TAP 206-017

Self-employed and Free Tax Preparation

Issue Statement:

Internal Revenue Service (IRS) trained volunteers who work at free tax preparation sites, Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE), are currently prohibited from preparing Schedules C, Profit or Loss from Business (Sole Proprietorship).  The sties can prepare a Schedule C-EZ, Net Profit from Business.  However, the Schedule C-EZ can not be used when the expenses are $5,000 or greater, the schedule shows a loss, or there is more than one Schedule C-EZ.

Goal Statement:

Increase the number of low-income, self-employed taxpayers who can have their tax returns completed at VITA and TCE sites.

Proposal:

TAP recommends the following changes:

• Allow VITA/TCE to offer a higher level of training or certification test for volunteers who prepare returns at sites serving low-income, self-employed taxpayers.  The training could be offered at two levels:
  
  • complete training on completion of Schedule C, and
  • basic training that excludes “depreciation of assets” and “business use of home.”

• Increase the limit of expenses to $10,000 for Schedule C-EZ and index the limit to the cost of living; allow multiple Schedules C-EZ for each taxpayer and allow Schedule C-EZ to be used when a business has a net loss.