New IRS rules for those of you that do your own tax returns.

[Drew Wiley]

Well, I'm just about to enter the IRS form quagmire tonight. I always like to understand this stuff myself because there is no guarantee even a tax accountant will be able to unravel all the convoluted last-minute changes; and I've sure known of them to make terrible mistakes before. I've been audited twice. A headache. Who knows how much time and money was expended at their end; but in each case I ended up with a 200-page doument in which the very last sentence simply stated, "no tax due". They had wasted their time as well as mine. But it's always unwise to throw pebbles at hornet's nests; so when in doubt, I tend to err on the
side of caution. But I do appreciate the heads-up.

[Corran]

I get a ton of 1099's each year and file a Schedule C as a sole proprietorship.

My recording and video equipment as well as some camera gear gets deducted from my (business) income. I don't depreciate it, I just take the whole chunk off that year's income (I show very little profit accordingly).

Does this change anything? I use H&R Block software and have had no problems. There was no mention of changes in the 2014 tax code for this specifically in the software (they are generally very good at notifying the user of changes). I filled in the information as it was requested. I don't get any money "back" from my business but of course I get a sizable amount from my W2 income.

I have already filed my taxes and gotten a return so apparently I did not throw up any red flags.

[MikeH]

I'm not familiar with Block's software, although I have a CPA friend who handles financial stuff for a large Corp- so he doesn't do taxes - who uses Block's software and thinks it's much better that TurboTax...

You need to do the elections like I mentioned at the top. You need to capitalize the equipment over $500 onto a "4562." When you do this there should be some options for depreciation type (MACRS, S/L, etc.), or there might be a checkbox, for "Section 179." If you do that, the software will write it all off in the current year. Also on this screen there might be 2 checkboxes for the 263 a elections that are shown on the PDF that I attached.

Section 179 allows you to write off capital equipment in the year of purchase, but you don't show it s repairs & maintenance, or supplies. It shows as depreciation expense... Hope this isn't too much "Accountants speak..." :-)

:-) This can't be more difficult than using Scheimpflug? :-)

[BrianShaw]

... :-) This can't be more difficult than using Scheimpflug? :-)

What an interesting perspective to consider.

[Corran]

Yep the software does the 4562 itself and asks about depreciation type. I check the Section 179 box. I guess I'm good but still thanks for bringing this up.

[Greg Miller]

Ok, I bought a Chamonix 8x10 last year, and a bunch of lenses, so I'm in the $5,000 not $500 area of expenses, are you saying with this new rule I'm not going to be able to write off aany more than $500??

If you're going to be a business, be a business. Decide on Sole Proprieter, LLC, S-Corp, C-Corp. Register your business in your state. Get certified to collect sales tax. Charge sales tax when you make a sales Get an accountant. Decide if you will be cash based or accrual based (will determine what you can expense each year), show a profit, use software like QuickBooks or FreshBooks, Track ALL purchases. Track ALL sales. File withholding taxes with your state, pay unemployment tax to your state, get equipment insurance, get liability insurance, track you car mileage,...

Then you can ask your accountant about expensing your equipment purchases. (some of the above also applies if this is a hobby rather than a business)

[StoneNYC]

If you're going to be a business, be a business. Decide on Sole Proprieter, LLC, S-Corp, C-Corp. Register your business in your state. Get certified to collect sales tax. Charge sales tax when you make a sales Get an accountant. Decide if you will be cash based or accrual based (will determine what you can expense each year), show a profit, use software like QuickBooks or FreshBooks, Track ALL purchases. Track ALL sales. File withholding taxes with your state, pay unemployment tax to your state, get equipment insurance, get liability insurance, track you car mileage,...

Then you can ask your accountant about expensing your equipment purchases. (some of the above also applies if this is a hobby rather than a business)

You assume too much, but thanks.

[axs810]

What if you're a 1099 sole proprietor that's taken a few 1099 jobs as an assistant or lab technician? Would you need to still register a business with the state? I don't consider myself a business at this point but not really sure what 1099 really falls into...im pretty new to 1099s im used to being w2

[Greg Miller]

What if you're a 1099 sole proprietor that's taken a few 1099 jobs as an assistant or lab technician? Would you need to still register a business with the state? I don't consider myself a business at this point but not really sure what 1099 really falls into...im pretty new to 1099s im used to being w2

If you are not a business, then you have hobby income. For that you need to report your 1099 income on 1040 line 21.

[Greg Miller]

You assume too much, but thanks.

If you are a hobby (as opposed to a business), then you can only deduct expenses up to the amount of income that you have. So to deduct your $5,000 in expenses, you would need to have $5,000 in sales. And then only if your hobby has earned a profit in 3 of the past 5 years, and only your expenses that exceed 2% of your AGI (although there is an exception if you are actually trying to be a business and keeping all the records that a business would keep).

This is obviously complex enough where most people should be getting advice from an accountant before gong down this road for either a hobby or a business.