I run a small software development business. My office is the spare bedroom in my apartment, which contains a computer desk where I work and a spare bed for guests. In 2006 I purchased the following capital equipment for business use: Computer monitors Video card DVD burner Computer cables Technical books
Total spent on the above is roughly $1K. My business generated about $12.5K in revenue last year. So I'm trying to figure out how to properly report these numbers on my income tax forms. Based on my understanding from reading Schedule C, the monitors, video card, dvd burner, and serial cable are all capital expenses that must be depreciated unless I take a section 179 deduction. So I went to form 4562. Reading the instructions for that form, it sounds like my capital equipment falls under the definition of 'Listed Property' (since they are computer peripherals) and they do not meet the exceptions clause (they are not used exclusively at a regular business establishment, since my second bedroom is not solely devoted to my business). So what I ended up doing was filling out the Part V Listed Property section of 4562, line 26. I filled out columns a-d
- i. I left the columns related to depreciation blank as I was taking a section 179 deduction for each item. My capital expenses spanned two forms and I didn't see a continuation sheet similar to Schedule D-1 for this. I then went back and filled out Part I and Part IV of form 4562 then put the value in the appropriate box on Schedule C. Finally, with regards to business use of the equipment, I do use the computer monitors for personal reasons a small percentage of the time. My questions are:
a) Is my capital equipment 'Listed Property'? b) In Part V of form 4562, should I leave the depreciation columns blank? c) Is the Identifying number field on form 4562 my Tax EIN? d) Do I have to document every use of my computer equipment (either for personal or business use) to compute the business use percentage, or are conservative estimates allowed by the IRS? I use my computer every day and it's cumbersome for me to document how it's being used all the time. e) How do I deduct the books? I'm currently reporting the books on Schedule C as 'Other Expenses'. f) How do I find a competent professional to help me in future years? I've tried finding leads through friends but no one I know has any contacts and I don't know how to quickly evaluate a tax professionals expertise. I'm trying to learn enough on my own so that I can make sure my taxes get done right, even if I don't do them myself. Sorry for the lengthy query. Thanks for any insight you can provide.