Accounting & Bookkeeping & Small Business Forum

[irla]

On Federal taxes Schedule C, how do I show start up costs? Can I expense them or do I have to amortize them? If amortize, how is this different than depreciaton? Or is it the same?

[CommonCents]

Hi irla,

On Federal taxes Schedule C, how do I show start up costs?
that depends on you. are you going to capitalize the costs or expense them? Either way you will need Form 4562 (Depreciation & Amortization). The form then flows to Schedule C.

Can I expense them or do I have to amortize them?
Per the IRS Publication 535, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized. (see chapters 7 & 8 for details) The publication also outlines how to make the election.

If amortize, how is this different than depreciaton? Or is it the same?
The concept of amortization is the same as depreciation, the only difference being the underlying capitalized asset. Intangible assets are amortized, fixed assets (tangible assets) are depreciated.

HTH,
Joyce

PS. If any of this is as clear as mud (as tax preparation can be), please feel free to email me directly. I don't mind at all walking you through the 4562/Sch C.