Ok I am going to just flat out go for gold here and see if someone will give me the benefit of their tax prowess. I've been doing my own personal taxes for a few years and approached 2014 with little fanfare and, unfortunately, too little research and had to call a timeout last night and get an extension because I started questioning the way I was doing it.
Our LLC was formed in 2011 for a pottery related business idea that never got off the ground. I kept it active and up to date since my partner planned to become a full time potter soon. In 2013 she quit her job and we began organizing, testing and preparing to work the show circuit.
The transition from a 15 year hobby in a garagio to a studio pottery intending to provide full time salaries took about 18 months and about $11k in 2013 and about $7k above revenue in 2014 in additional supplies and equipment. I also built a 300' finished out studio on our property for 14k (materials) from summer 2013-summer 2014.
If your still reading I appreciate it, there is a question planned ;-)
So to summarize I have a 4 year LLC, with no revenue the first 3 years (2011, 2012, 2013) and $7k losses in 2014 and startup cost from 2013 of $25k. The 7 grand in losses from 2014 I know I can take all at once because about 5k would qualify as section 179 equipment that I can take all at once and the rest is ordinary expenses resulting in end of the year inventory.
My questions regards the 11k supplies and equipment from 2013, the 14k building and the original pottery equipment we had prior to the business.
Most of this original equipment (about 15k worth) was bought new from 2005-2009. It is my understanding that I can assign a market value to this equipment at startup and depreciate it (figured I would check classifieds). I think depreciation for studio equipment is 7 years as a catch all classification under the depreciation table.
2013 Equipment & misc startup tools and supplies:
The 2013 equipment was bought and placed into service in 2013 but we had no revenue and I didn't file a schedule C in 2013 so I think I need to depreciate the entire 11k from 2013, equipment and supplies, over the 5 year startup depreciation provision for depreciation.
The building spanned both 2013 and 2014 and I am unsure where it falls on the depreciation charts. I have seen anywhere from 5 years to 40 years on depreciating this around the net and can't seem to nail the right place on the IRS site. It is a finished out and heated space that is 100% pottery. I also used the 500' garage almost exclusively as a glaze/kiln/finishing studio so I was going to take the percentage of house cost on that. We spread out into about 400' foot of additional house space but figured I would not take this space as those 2 rooms are used for other activities here and there so its not 100%
I am having trouble distinguishing between incidental equipment and equipment that needs to be depreciated. Pottery kilns, wheels, slab roller, pug mill, mixer and such are a no brainer but what about the extruder dies? some of the larger hand tools? What do you guys take right away and what to you depreciate?
As a side note I also bought a new travel trailer in 2014 for shows. We also use this for ordinary camping so I am only planning on taking the camping fees and mileage for the truck. I don't think I can actually write off any of the purchase cost of this trailer for the business, right?
So for you tax experts, any red flags in what I've said? Anyone know what the number of years I need to spread out taking the studio building? Could the studio building's 300 feet just be added to the house and I take it with the 500' garagio? can the garagio be taken even up with the rest of the house or is it considered 'lesser' space?
I know the gut check advice is to go get a tax accountant and I am seriously thinking of going back to my accountant that did non pottery business taxes for years, but I am hesitant to do so.
It's not really the money but the knowledge I worry about missing. I have used accountants for decades and they add a layer of insulation from the process and frankly they have to spend time to come up to speed on pottery as well so its good for me to know it too. In the early days of a previous business I did taxes myself and I think it helped a lot with my decision making as we expanded.
Anyway I appreciate any initial reactions from you guys.