Advise from the Pros here please =)

[MariaR08]

Being we're all tax preparers here... I thought "who better to get advise from?"

Ok, so I'm a first-year preparer in sunny California (not so sunny right now due to rain) and I need some help/clarification on filing my OWN tax return.

Here's where I need some insight:

1) began planning in Aug 2008,
2) advertisement costs incurred Sep-Dec 1, 20008 (webpage, biz cards, flyers)
3) Sep 2008 paid for CA tax education course
4) Nov 2008 paid registration fee to CTEC (Calif. Tax Education Council)

5) Oct-Dec 10, 2008: purchased some supplies & equipment
a. new printer
b. 10key attachment for laptop
c. computer cables
d. using existing personal laptop
e. purchased proseries tax software

- December 20, 2008: open for business

So... since I "started/opened for business" December 20, 2008... my expenses listed above for #2 are considered "start-up costs" and I can expense/deduct the total - right?

For #3 (tax course) I don't think that's deductible as a business expense right? However, I am employed with a full-time job as a Financial Assistant where I review, prepare, and analyze reports - including preparation of tax related reports for the firm. With that said, can I then claim my tax course fee under Tuition & Fees deduction - since it appears to meet the condition whereby it enhances my current job skills?

#4 - is that deductible anywhere?

For #5, obviously, I had to purchase a few things in preparation. I think under section 179, I can fully expense my purchases in the first year I purchased them, right? So I would fully expense a. printer, b. laptop equip, and c. cables - right? My tax software only has a useful life of 1yr since you have to buy a new version every year - so does my tax sofware fall under section 179 expense as well?

The one item I'm unsure of is my laptop. It's a very old laptop, worth approx $500. Used 80% for business and 20% for personal use. What do I do with that - depreciate it? Is it worth it to depreciate it?

Any and all input is appreciated here. This being my first-year I want to make sure I properly account for everything and plan ahead for next year's tax return (my 2009 return).

Thanks!

~Maria

[thomtax]

Welcome Maria. I just had a moment to give a quick look at your post, not get into detail, but I believe you meant that you opened in December, 2008. And I'm not trying to be a smart aleck and picking on you.

LT

[taxmom34]

are you filing schedule C? if you're going to use 179 deductions for start up what are you going to use next year ? you are looking for suggestions, here is what i do: software i put as supplies, other equipment, if it was under $250 i put it in as equipment, if over i depreciate it. the registration fee i would put under license.
Lots of luck on your first year, i remember mine, i was scared to death!! lol

[Burke]

Software is depreciable property (3-yr) and you can 179 expense it. Do NOT put it in supplies; it will be disallowed on audit, and then written off over 3 yrs.

[erchess]

Tax Course

When I started in this business I was an employee and I could not deduct the cost as an employee business expense because it was not profitable for me to itemize and (if I recall correctly) because it prepared me for a new trade or business.

Your situation is different. You are a schedule C filer and I think you can put that course on Schedule C where obviously it will do you more good. If somebody else says I am wrong, believe them but I think I am right here. I don't think the new trade or business rule applies to Self Employed People.

[travis bickle]

I believe you have to amortize

Good day and welcome,

You write that you incurred "start-up" expenses consistent with the launch of a new business.

From what I understand, those costs are to be amortized (only the expenses of an "up and running" business are allowed to be deducted/expensed).

Here is a link to a financial article from CCH - http://www.finance.cch.com/text/c60s15d215.asp
In this article, CCH outlines the normal 60 month amortization requirement and also the alternative method allowed by the American Jobs Creation Act of 2004.

SInce you purchased CCH's proseries and since you work as a financial/tax analyst you may well be familiar with the tenor of the article itself.

Finally, you may wish to begin checking chapter 8 [page 25] of pub 535.

Best wishes for success!

[Mo Sheets]

Business Start Up Costs

Hi Maria,

The following is off the IRS website and might be of assistance to you:

Business Start-Up Costs
Business start-up costs are the expenses you incur before you actually begin business operations. Your business start-up costs will depend on the type of business you are starting. They may include costs for advertising, travel, surveys, and training. These costs are generally capital expenses.

You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining cost must be amortized.

For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535.

Good luck!

Mo

[AJsTax]

Mo is correct

Normally start up costs are amortized. There is a special expense allowed in the first year of $5000 with the balance (if any) to be amortized.

Software that is replaced every year (like tax software) can be expensed. It is an annual cost and does not last more than a year. Although we keep it to go back and review or file late returns.

Good luck in the future. With all the new rules Congress is creating a lot of work for us!!!

[MariaR08]

I want to chime in here and first of all say "thanks!" to everyone who has contributed to this thread.

In reference to the software being expensed, yes, I figured since we do have to purchase new software every year. It doesn't have a life of more than 1yr.

As far as the suggestions go, since this is my first year, I didn't purchase too much. I do plan on purchasing alot more supplies & equipment including a new computer, new (more expensive) printer, etc., for the coming years. I'll then have assets which I can depreciate over time.

~Maria

[Lion]

2008

If you're working on your 2008 return and opened your business in December, you probably didn't make very much income. Why don't you use the least amount of deductions available to you by depreciating, amortizing, etc., for 2008 to have greater deductions during 2009 and future years when you expect income?

[MariaR08]

If you're working on your 2008 return and opened your business in December, you probably didn't make very much income. Why don't you use the least amount of deductions available to you by depreciating, amortizing, etc., for 2008 to have greater deductions during 2009 and future years when you expect income?

That's true... but if I think about it a little... I had just a few expenses and on top of that they weren't that expensive. For example, bought a new portable laser printer-$99. If I depreciate that... it won't be much.