Use Schedule C (Form 1040) to report income or loss from a business you operated or a profession you practiced as a sole proprietor. 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.

Also, use Schedule C to report (a) wages and expenses you had as a statutory employee, and (b) certain income shown on Form 1099-MISC, Miscellaneous Income. See the Instructions for Recipients (back of Copy B of Form 1099-MISC) for the types of income to report on Schedule C.

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.

The credit for increasing research activities has been modified and extended for amounts paid or incurred before January 1, 2010. See Form 6765 for details.

For property placed in service during a tax year beginning in 2008, the limit for the section 179 deduction to expense certain depreciable business property has been increased to $250,000. This limit will be reduced when the total cost of section 179 property placed in service during the tax year exceeds $800,000.

In addition to the increase discussed in the above paragraph, the higher section 179 deduction has been extended for qualified section 179 GO Zone property placed in service in 2008. Substantially all of the use of this property must be in specified portions of the GO Zone.

For qualifying property acquired and placed in service in 2008, you may be able to take a depreciation deduction equal to 50% of the adjusted basis of the property. Qualifying property includes certain property with a recovery period of 20 years or less, certain computer software, water utility property, or qualified leasehold improvements. For information, see Pub. 946.

The Indian employment credit has been extended for qualified wages paid to an employee through December 31, 2009.

These rules were due to expire at the end of 2007 but have been extended to contributions made in 2008 and 2009.

This deduction was available for certain demolition and clean-up costs paid or incurred before January 1, 2008.

The increased expensing limit was available for reforestation expenditures amounts paid or incurred before January 1, 2008.