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  • Hey all, just changed over the backend after 15 years I figured time to give it a bit of an update, its probably gonna be a bit weird for most of you and i am sure there is a few bugs to work out but it should kinda work the same as before... hopefully :)

How are you writing Scarlet-X off?

Steve Tenuto

Steve Tenuto

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Hey guys,

How do many of you sole-proprietors/LLCs plan on writing Scarlet off? A one-time (current expense), or amortization (depreciation)? How many years on the depreciation schedule? I'm in California BTW.

It'd be nice to write this off as a one time expense.. :biggrin5:
 
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In Canada I can write it off as a one-shot (unless fiscal laws have changed again).
 
Can we assume you are talking about US tax code?

Everyone's business, finance and tax issues are different so it will be hard to get a completely relevant answer. DISCLAIMER: I AM NO TAX ACCOUNTANT!!! But... some thoughts to consider...

the cost of a Scarlet X + accessories is low enough that you probably have the choice of expensing it in one year or amortizing it - whichever work better for you. Also relevant is the fact that the equipment has to be placed in service before it can effect your taxes - i.e., even if you order it this year, you will not be able to write it off until you receive it and use it. So, if you don't get it before the end of the year, no benefit in 2011. Finally, if you decide to spread the amortization over years (I believe it's 3, but DO NOT rely on my knowledge of this for your planning) your write-off for 2011 will be pro-rated to the portion of the year that you owned it. That's what I think I know. :-)

Like I said, I am not an accountant and I offer this up only as food for thought. Do your homework and, even better, talk to a real tax person! (Maybe there is even an accountant among REDusers!!)
 
Terry VerHaar said:
Can we assume you are talking about US tax code?

Everyone's business, finance and tax issues are different so it will be hard to get a completely relevant answer. DISCLAIMER: I AM NO TAX ACCOUNTANT!!! But... some thoughts to consider...

the cost of a Scarlet X + accessories is low enough that you probably have the choice of expensing it in one year or amortizing it - whichever work better for you. Also relevant is the fact that the equipment has to be placed in service before it can effect your taxes - i.e., even if you order it this year, you will not be able to write it off until you receive it and use it. So, if you don't get it before the end of the year, no benefit in 2011. Finally, if you decide to spread the amortization over years (I believe it's 3, but DO NOT rely on my knowledge of this for your planning) your write-off for 2011 will be pro-rated to the portion of the year that you owned it. That's what I think I know. :-)

Like I said, I am not an accountant and I offer this up only as food for thought. Do your homework and, even better, talk to a real tax person! (Maybe there is even an accountant among REDusers!!)
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Terry, thanks for your info! It seems one "tax pro" to the next gives me different answers on whether I can expense it in one year, or not. That said, I do know that expensing the year you receive/use it is the only legal way.

So here's a question: If you run a small home-business with pretty simple tax procedures, etc... Wouldn't it just be worth it to just go ahead and 'try' to expense it in one year? If you get audited and they find that I should have amortized it- then I'll just owe the difference anyway... correct? Or are there fines associated with being audited?
 
Steve Tenuto said:
Terry, thanks for your info! It seems one "tax pro" to the next gives me different answers on whether I can expense it in one year, or not. That said, I do know that expensing the year you receive/use it is the only legal way.

So here's a question: If you run a small home-business with pretty simple tax procedures, etc... Wouldn't it just be worth it to just go ahead and 'try' to expense it in one year? If you get audited and they find that I should have amortized it- then I'll just owe the difference anyway... correct? Or are there fines associated with being audited?
Click to expand...

For the sake of discussion... [cuz I'm not an accountant - did I mention that? lol]...

I believe the expensing vs. depreciating is completely based on the total amount of equipment you want to write off. By itself, the Scarlet + accessories is unlikely to exceed the limit. The point is, even if it is tangible equipment that would normally be depreciated, current code (I think) allows you to accelerate that to a single year. If you do your own taxes with the help of TurboTax, like I do, that stuff is pretty well spelled out as you go through the process. Right now, you can probably find an answer by visiting the IRS web site.

So - as to your question about timing... all other things being equal, saving money today (early 2012) is always better than saving money tomorrow (early 2013). Of course, everything else is never exactly equal. If next year's income (2012) will be much higher than thisn year's (2011), then you might be better either holding off the purchase (delivery) until 2012. And, if your income is somewhat low but consistent, perhaps the write-off over 3 (or 5?) years might be of more benefit in total tax savings. It's a Present value of future money thing.

As for an audit - if it is determined that you owe more, you will have to pay the difference along with a penalty. But, they won't jail you unless you're convicted of fraud. :-)

Hope that helps...
 
The past two years I have taken the one time right off on close to double the amount of the Scarlet Package. I'm also in California, no Tax Expert, but my accountant has advised that route both years. If your SoleP or LLC, you should be good to go, if the code hasn't changed this year...

my 2¢,

-Dane
deeprootsmedia.com
shootcutcolor.com
 
If you are just a hobbiest, you can't write it off. If you have related income in the year you put it into service, you can use a Section 179 deduction to expense it up to the statutory limits or your income, whichever is less. I also believe California has a lower limit on Sec 179 than the Feds ($25K?) so watch out for that.

I'm as much of an accountant as Terry. Botch this up and your dream of being a big Bollywood director will be meet a similar fate to Al Capone.
 
Terry VerHaar said:
DISCLAIMER: I AM NO TAX ACCOUNTANT!!! But... some thoughts to consider...
Click to expand...


Terry VerHaar said:
DO NOT rely on my knowledge of this for your planning
Click to expand...

Terry VerHaar said:
Like I said, I am not an accountant
Click to expand...

Terry VerHaar said:
[cuz I'm not an accountant - did I mention that? lol]...
Click to expand...

Terry VerHaar said:
all other things being equal, saving money today (early 2012) is always better than saving money tomorrow (early 2013). Of course, everything else is never exactly equal. If next year's income (2012) will be much higher than thisn year's (2011), then you might be better either holding off the purchase (delivery) until 2012. And, if your income is somewhat low but consistent, perhaps the write-off over 3 (or 5?) years might be of more benefit in total tax savings. It's a Present value of future money thing.
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I'm thinking Terry is a closet accountant....
 
Colin Sheldon said:
Isn't it a class 10 depreciation property/fixed asset? I'd recommend you talk to an accountant.
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It's class 10 (30%) if you acquired the goods before 2005 (roughly, there's a list of specific dates). It's class 52 (100%) if purchased after January 27, 2009, and before February 2011 (for the 2010 tax declaration for example).
 
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I've had a chat to an accounting agent here in Australia, she told me I'll have to get it back in chunks over say 5 - 6 years, but I should get it all back eventually. Pretty cool.
 
JosefGatti said:
I've had a chat to an accounting agent here in Australia, she told me I'll have to get it back in chunks over say 5 - 6 years, but I should get it all back eventually. Pretty cool.
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You get a yearly tax deduction based on the % scale of depreciable value over a five year period. Its not a rebate, so no you will never get it all back in tax.

A deduction basically works like this in Aus (these are sample figures only)

Total earnings = $90

Total value of assets purchased = $50 @ $10 depreciable per year over 5 years.

Tax paid 10% = $9

Your deduction will then work like this:

You paid 10% on $90 income for a total of $9 tax payable. You can apply the $10 depreciable value as a deduction. Meaning whilst you paid tax on $90 your taxable income becomes TOTAL INCOME ($90) - Depreciable value on assets ($10) = Total taxable income of $80 @ 10% = tax payable of $8. The government now owes you $1 on your tax return.

Again this relates to Australia only and the tax rate quoted here is just a nice round figure. Your tax rate of course will vary based on your yearly gross income.
 
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