Video instructions and help with filling out and completing Which Form 4797 Expenditures

Instructions and Help about Which Form 4797 Expenditures

In this talk we'll go over an example for amortize in your start-up costs for your business the standard rule for amortization is that an intangible asset cost basis is divided by 180 months and then an expense is taken each month however startup costs have additional rules that I will cover in this example startup costs are costs that are incurred before the business actually begins operating and these costs would normally be deductible as business expenses but cannot be deducted because the business has not began operating startup costs are recorded as a current asset in the month you begin business you can take a deduction of startup costs of up to $5,000 in the first month if total startup costs were greater than 50000 then that initial 5,000 dollar deduction must be reduced dollar for dollar by the amount that exceeds 50,000 therefore if your total startup costs were greater than 55,000 there is no initial deduction allowed however the remaining or total startup cost can be amortized this means divide the total startup cost by 180 months and the resulting amount is the monthly amortization expense that can be deducted so let's take a look at an example best retail pays $54,000 in start-up costs before opening their retail store for business in October of 2014 let's calculate what their total deduction for amortization of start-up costs would be in 2014 since the total start-up costs are greater than 50,000 the initial $5,000 deduction is limited dollar-for-dollar of the amount over 50,000 therefore the initial deduction amount that can be taken for 2014 in the first month is $1,000 which is equal to the $5,000 initial deduction amount minus the $4,000 which exceeds the $50,000 limitation the remaining startup costs to be amortized then is 53,000 dollars which is the 54,000 minus the initial deduction of a thousand so we will take the 53,000 dollars that's left to be advertised / a hundred and eighty months which equals two hundred and ninety-four dollars and forty four cents of amortization expense each month for 2014 will take three months of amortization expense for October November and December so take three times two hundred ninety-four and forty four cents per month and that equals eight hundred and eighty three dollars and 33 cents total amortization reported on Form 4562 depreciation and amortization would be one thousand eight hundred and eighty three dollars and 33 cents for 2014 in this example