Schedule C -Choosing Expense Categories

[SherriW]

Just opened my daycare in August 2017. First time for taxes and I'm doing my own with the help of Toms Book.

I read an article of Tom's stating "If the expenses on any one line of your Schedule C are significantly larger than all your other expenses, they may attract attention from the IRS...spread them over several different lines" I seem to be making this simple step more difficult than any. haha

Here's my breakdown. Do I need to adjust anything to make my lines more even?

Line 13 Depreciation $672.04*
Line 18 Office Expenses $24.40
Line 22 Supplies $87.70
Line 27a Other Expenses $1716.18**
All other lines are 0

*depreciation from form 4562 includes new wall to wall carpet purchased on 10/25/17. I claimed it as personal property/7 years depreciation and took the 50% bonus depreciation and used the midquarter convention because this is the only purchase I have for depreciation. Don't know if this is eligible for the new 100% bonus depreciation but want to use 50% anyway to not have a loss.

**Part V breakdown for line 27a is as follows:
Toys (100%) $314.38
Food (100%) $244.48
Daycare Supplies (100%) $107.91
Activity Expenses (100%) $340.88
Household Cleaning (T/S%) $26.69
Furniture (T/S%) $681.84

And with the new tax law effective October 2017, I'm assuming I dont need do submit any special statement with my taxes.

FYI...my line 1 Gross Receipts or sales is $4800.


Am I in the ballpark with these calculations?

Thanks!!!

[TomCopeland]

Originally Posted by SherriW

Just opened my daycare in August 2017. First time for taxes and I'm doing my own with the help of Toms Book.

I read an article of Tom's stating "If the expenses on any one line of your Schedule C are significantly larger than all your other expenses, they may attract attention from the IRS...spread them over several different lines" I seem to be making this simple step more difficult than any. haha

Here's my breakdown. Do I need to adjust anything to make my lines more even?

Line 13 Depreciation $672.04*
Line 18 Office Expenses $24.40
Line 22 Supplies $87.70
Line 27a Other Expenses $1716.18**
All other lines are 0

*depreciation from form 4562 includes new wall to wall carpet purchased on 10/25/17. I claimed it as personal property/7 years depreciation and took the 50% bonus depreciation and used the midquarter convention because this is the only purchase I have for depreciation. Don't know if this is eligible for the new 100% bonus depreciation but want to use 50% anyway to not have a loss.

**Part V breakdown for line 27a is as follows:
Toys (100%) $314.38
Food (100%) $244.48
Daycare Supplies (100%) $107.91
Activity Expenses (100%) $340.88
Household Cleaning (T/S%) $26.69
Furniture (T/S%) $681.84

And with the new tax law effective October 2017, I'm assuming I dont need do submit any special statement with my taxes.

FYI...my line 1 Gross Receipts or sales is $4800.


Am I in the ballpark with these calculations?

Thanks!!!

You don't need to depreciate the carpet because it cost less than $2,500. Deduct the time-space% in one year. You can choose to depreciate it if you want to not show a loss.

You don't need to change any of the categories. You are fine. You don't need to attach any special statement.

[SherriW]

The actual cost of the carpet is $6002.22

My calculations were $6002.22 x 22% (T/S%) = $660.25

The remaining $660.24 x 7.14% (1st year of 7 year S/L depreciation rate) = $47.14 x 2 (because 1st year rate only represents 1/2 year) = $94.28 x 12.5%(4th qtr) = $11.79 MQ

$660.25 (bonus) + $11.79 (MQ) = $672.04 reflected on schedule C line 13

Am I doing this correctly?

[TomCopeland]

Originally Posted by SherriW

The actual cost of the carpet is $6002.22

My calculations were $6002.22 x 22% (T/S%) = $660.25

The remaining $660.24 x 7.14% (1st year of 7 year S/L depreciation rate) = $47.14 x 2 (because 1st year rate only represents 1/2 year) = $94.28 x 12.5%(4th qtr) = $11.79 MQ

$660.25 (bonus) + $11.79 (MQ) = $672.04 reflected on schedule C line 13

Am I doing this correctly?

Good news. Since you bought the carpet after September 27, 2017 you can use the 100% bonus depreciation rule. So, deduct the entire $660.25 in one year on Schedule C (list it as an Other Expense).