Zahra, a self-employed, single taxpayer, reports all her income on Schedule C. During the tax interview,...

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Zahra, a self-employed, single taxpayer, reports all her income on Schedule C. During the tax interview,...

Zahra, a self-employed, single taxpayer, reports all her income on Schedule C. During the tax interview, her Tax Professional determines that Zahra may qualify for the Earned Income Credit. To confirm her eligibility for this credit, the Tax Professional should:

	Accept Zahra's statement of expenses with no additional questions asked.
	Explain to Zahra that she must report all her business income and expenses.
	Ignore items that might reduce Zahra's refund.
	Provide amounts for Zahra's business expenses typical for her line of work.

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Answer 1

Answer #1

The answer is the 2^nd option – “explain to Zahra that she must report all her business income and expenses”.

In this case Zahra is reporting all her income on schedule C.

As per IRS an individual has to make sure that all income and expense are reported on the individual’s Schedule C or Schedule C-EZ.

This is per letter 5621-A of the IRS.

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Answer 2

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