Tax Questions

[brewercm]

I will be going to apply for and get my DBA and Tax ID over the next couple of weeks since I'm out of school for the moment (graduate in May woohoo).

My question is can I write off the equipment I purchased last year in the buildup on this years taxes even though my tax ID etc. wasn't created until after the first of the year? That is if anybody would happen to know the answer.

[Buddha]

In order to take a deduction, you would have to be able to show that it was a business expense for an existing business. Can you do that?

[brewercm]

It was the point of purchasing the items was to have a business. There were several purchases through the year that were specifically for the business as I was finishing up school (new pc I use strictly for editing, software, new camera body, lenses, lights, backdrops, etc.).

[Buddha]

If you had something in writing which showed your intent for purchasing the items, your expenses might be deductible even with a non-operating business.
You might call the IRS at 866-729-0922(?) and ask for 'Tax Law'. They should be able to ask more details and give you better advice than you can get here. While you have them on the phone, be sure to ask about which forms and schedules you will need to file correctly.

[andyz]

Depending on the type of business entity, can the assets be transferred to the business now and depreciated?

[Buddha]

My personal guess is no, but I would call the IRS and ask Tax Law people for the answer. They don't ask for names or ID.
If it's a sole proprietor call the number above.
If its a business, look up IRS.gov and find the ph# for businesses.

[brewercm]

Yea, my wifes uncle retired from the IRS a couple of years ago so I'll give him a yell and see what he has to say.

Thanks for the responses as some of this gets into touchy areas.

[FireHeart Photography]

i would find yourself a good CPA to do your taxes for you every year - they should be able to answer these questions and get you started on the right foot. I would not suggest doing your own taxes as there are many items you may miss expecially when starting a new business.

[Buddha]

De nada.

[ggeen]

You could sell your business the equipment at current market value less depreciation. This is the same as investing cash into the business. It is called owner's equity. Your equipment shows up on the books as an asset. Yet another way to go with this is for your business to rent e equipment from you on an as needed basis. Some do this to keep the equipment safe from law suits. I don't know if it actually works, but that was the reasoning I was told.

Both of these options are SOP for new business owners with existing equipment.

[Buddha]

Unless you find a way for money to actually be transferred from you to your business, which is also you, that will probably be called a wash and no tax benefit can accrue.
My understanding is that as a sole proprietor, you and your business are one and the same. A different type of business may make a distinction between a business and it's owners.
This is just one more question to ask the IRS Tax Law people.

This is a page that might prove useful, too.
Self-Employed Individuals Tax Center

[ggeen]

Originally Posted by Buddha

Unless you find a way for money to actually be transferred from you to your business, which is also you, that will probably be called a wash and no tax benefit can accrue.
My understanding is that as a sole proprietor, you and your business are one and the same. A different type of business may make a distinction between a business and it's owners.
This is just one more question to ask the IRS Tax Law people.

This is a page that might prove useful, too.
Self-Employed Individuals Tax Center

Yes, I see where you are going with that. I was always taught to never mix your money with your business. Even as a sole proprietor. Keep a business account and a personal account. Granted, it has been nearly 30 years since I took an accounting course.

[Buddha]

If it has been that long, you need to either pay a CPA, not a tax preparer, to answer questions, or call Tax Law for sure, so you can get ahead of the game and do it right. If you are going to have a CPA do your taxes, be sure you talk to him about what software to use and what data he needs come tax time.

[brewercm]

I actually just finished taking my accounting courses (the ones I need 1 & 2) and this type of situation never came up. Probably best to just get with a CPA and let them help me out if my wifes uncle (retired IRS CPA) can't.

[SCone]

Business Startup Costs: Write Off!

Only question is, "Did you start your business in 2011?"

Many people start a business long before they deal with a DBA or a new tax ID.