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Video instructions and help with filling out and completing form 4562 example 2019

Instructions and Help about form 4562 example 2019

Well over the course of this brief video I'm going to show you how to calculate depreciation utilizing the straight-line method there are several different alternatives for how to calculate depreciation the straight-line method is by far the most simplistic and easiest to do but it's also fairly common although you do see companies utilize different methods on different levels so the reason that we calculate depreciation first obviously is because of accounting we know that we can't necessarily claim the value of an asset as the same over a period of time so for example if we purchase something like a company vehicle and say we purchase it for $20,000 right off the lot we know that over time that vehicle will not be worth the same that it was when we purchased it not only is it going to accrue mileage but there's going to be additional wear and tear that is going to make it worth less and so for for assets we depreciate those because we know that they lose value over time same thing with equipment like laptops and different things they begin to deteriorate over time so we can't claim the value of those as assets on our balance sheets so how do we go ahead and do this there's a basic equation for how to calculate depreciation utilizing the straight-line method the first thing that we need to know is the purchase price of that particular asset so this is the amount that we actually purchased it for and then we need to do is we need to determine a salvage value and so we factor out what's called a salvage value and I'll explain more about what that is and then what we do is we divide that by what we call our estimated useful life and the estimated useful life is really how long do we feel like this asset is going to be useful the IRS or the Internal Revenue Service usually has guidelines with regards to how long you can depreciate a particular asset so typically it's around five years and after five years you can no longer depreciate an asset and the reason that's done is to make sure that you can't necessarily extend the value of an asset over a long period of time because at some point assets are no longer going to be useful they're not going to work to the capacity they did before now one thing I will say is that simply because you've depreciated an entire asset its entire value that means that you can't claim it as an asset on your balance sheet but that doesn't necessarily mean that you need to replace that particular asset so with a vehicle example if you've depreciated the entire value of the vehicle that doesn't mean that you have to get rid of it and you have to purchase a new vehicle that merely means for accounting purposes you can no longer claim

FAQ

Is the initial investment, when starting a company/LLC, considered tax deductible?
If you’re looking to involve yourself in business ownership for the first time, don’t be surprised when you have to dig deep into your pockets to cover the array of initial and ongoing business expenses you’ll incur. Fortunately, the IRS offers a silver lining when it comes to claiming tax-deductible business expenses when you file taxes each year.According to the federal tax code, the owner of a limited liability company (LLC) can deduct startup expenses incurred by the business, no matter how the LLC is designated in terms of its tax structure. To claim this business tax deduction, an LLC has to incur startup expenses before it formally becomes operational. Once the business is officially open, ongoing costs can be written off as well under the category of operating business expenses.What Are Startup Costs?As the name implies, startup costs are expenses incurred by an LLC owner in the very early stages of business development. If you already have or plan to start an LLC, startup costs you can write off include the money you pay to create an LLC—or the money you spend to either investigate or actually purchase an LLC. For example, you can deduct the costs you incur to survey a marketplace for your new business, money you spend on marketing to promote your “grand opening,” travel expenses you incur to get your business off the ground, and fees for training new hires in your office. In essence, startup costs are incurred before you make your first transaction with a customer.What Are Organizational Expenses?Organizational expenses are the required expenses involved in formally registering an LLC as a business entity. These costs include accounting fees, attorney expenses to help you draft and negotiate your LLC’s membership agreement, and other costs directly related to the paperwork that must be filed with state agencies. Certain organizational expenses that cannot be deducted include investor solicitations and attorney fees for assistance with drafting customer contracts.How Much Can You Deduct?LLC members can deduct startup and organizational expenses incurred during a company’s first year of operation. However, there is a limit—no more than $5,000 of these LLC expensescan be deducted. LLC members must reduce this deduction by an amount of total costs that are in excess of $50,000. The amount that exceeds this $50,000 cap is considered amortizable.Startup costs can be claimed as a write-off for the year in which they are paid. For example, startup business expenses paid in 2015 must be claimed on a 2015 LLC tax return when you file it with the IRS in 2016.How to Amortize Startup CostsKeep in mind that both startup and organizational costs are subject to amortization rules since they are classified as capital expenditures. As such, you must claim these deductions over the 180-month period that begins when an LLC becomes an active business. You can opt for an alternative amortization period, as long as it is not shorter than this 180-month period.In order to amortize your business expenses, use Form 4562 and attach it to your initial LLC tax return that describes your company’s activities. In addition, you must attach a statement to Form 4862 outlining your business and each specific startup cost for which you elect amortization. It should also include the date the LLC officially became operational and the amortization period you are requesting.