What best practices can you share with documenting business expenses? Specifically, I have confusion over when it’s possible to expense a tangible item versus depreciate versus Section 179 it.
The things that give me problems are cell phones, computers, hand tools, specialized transport cases for tools/equipment.
It seems from reading of Section 179 deductions that if the total dollar amounts are relatively low (as in less than $100k total) then you can use that for all of the items I mentioned. Most websites that discuss this are unclear. Even IRS documentation is unclear.
In past years, I’ve simply put cell phones under office expense category on my Schedule C and hope to not be audited. I think Section 179 works for them, but the paperwork to file for the Section 179 was very confusing and I couldn’t figure out how to do it the last few years, so every year I just shove my legitimate expenses into other categories.
I’m not interested in hiring an accountant for the simple reason that until I fully understand how something works, I don’t feel comfortable subcontracting it out. Anytime I go to the doctor or car mechanic, I make sure to have done as much research as possible before hiring someone to do it. Also, it’s possible the accountant I hire does it incorrectly as well. And I’m less interested in an accountant in filing papers, and more interested in one who would advise me at the start of the year to plan how I’ll create expenses as I go, rather than how to fill out the forms, when there’s no actionable changes I can make.
I get the impression that if I can figure out how the 179 documentation works that I can use it for all of the items above. Also that it might be possible for me to use depreciation method on items in a strategic way in order to push the tax credits to a future year where I’ll be in a higher tax bracket. For example, last year I bought a computer for work but made relatively little money. I may try to depreciate that so that I can get some of the tax credits in 2018 and 2019 for that purchase. But then that’s confusing too because you’re supposed to use a depreciation schedule, of which I don’t believe one exists. From my reading of documents, it seems like I have to decide on the lifespan of the computer and depreciate accordingly but maybe the IRS will decide they don’t like it if I’m audited and I’m screwed. “They know what porn is when they see it” type of rule seems to apply.
What best practices can people share? Other than hire an accountant.