Small business schedule C and depreciation

[turbosl2]

I am contemplating filing my own taxes as I usually do or hiring a CPA. 
The one outstanding question I have is depreciation. Here is my situation:

Spouse and I employed at a company in corp America. Always do my own taxes. Purchased a small business this year. Paid 180k of which 160k I deemed as assets. (Physical business equipment) Space is leased. Financing was done 3 ways. Spouse and I 401k loan to come up with 95k in physical cash (with part of our savings). Remaining is paid monthly as owner financing. 
Each month I deduct on my P&L the cost of these loans but do not account for the physical cash to purchase as mentioned above, along with additional other expenses that come with the business. 

Tax question. Can I take the 160k and depreciate it over time via straight line (160k /5yrs =32k yr…etc )  AND use the cost of the loans as an offset to the profits made for the year?

Reason I ask is these ARE monthly bills that eat up the cash flow of which I deem an offset but I am not sure if that is double counting?

I was planning to file a schedule C with my personal taxes. 

This is a sole member LLC

Thanks

[rjs]

You need a tax professional to review your entire tax situation and advise you on how to handle the small business that you purchased. Do not try to do it yourself.

[Mike9241]

use a pro the first year.  as a purchaser of a business form 8594 probably needs to be filed. this is an asset allocation statement required of both the buyer and seller.  Turbotax does not support this form. the IRS uses this form to check to see that both buyer and seller allocated the price the same way. second, what was the extra $20K for? It may be amortizable. third, the equipment may not be 5 year property 7 years is possible.  forth,  $32K  the first year is not allowed. you can use straight line {Straight line election. Instead of using either the 200% or 150% declining balance methods over the GDS recovery period, you can elect to use the straight line method over the GDS recovery period} but there is a convention that applies to the first year which does not allow a full year's depreciation (you get it over 6 or 8 years).  also to use straight line you must include an election to elect out of bonus/special depreciation

[turbosl2]

I might have to. Not sure if this matters but the previous owner was my friend. In terms of the governments eyes his business closed and mine opened. Completely new LLC, insurance, lease,payroll,EIN…etc. Does this change anything you mentioned above. 

[turbosl2]

The 20k was not meant to be shown as extra. The sale paper was for 180 of which was written as the business and all assets…etc. We figured 160k of that was tangible and the remaining 20k was client list…etc. 

[Anonymous_]

@turbosl2 

I agree with @rjs and @Mike9241; do not try to prepare your return this tax year by yourself. 

You might want to investigate TurboTax Live or Full Service (link below), but note that the TurboTax individual programs do not support Form 8594. It is also irrelevant that the seller of this business is your friend.

https://turbotax.intuit.com/lp/ppc/1271?srqs=null&cid=ppc_gg_b_stan_all_na_turbotax-live_ty21-bu2-sb...

An enrolled agent in your area might be a better option.

https://taxexperts.naea.org/listing/service/business-tax-preparation

[rjs]

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@turbosl2 wrote:

In terms of the governments eyes his business closed and mine opened. Completely new LLC, insurance, lease,payroll,EIN…etc.

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Then you didn't buy the business. Maybe your new business bought assets from your friend's business. You need to clarify exactly what was bought.

And if you formed a new LLC, who are the members of that LLC?

These are more questions that you need to discuss with a tax professional.

I would not recommend TurboTax Live because you don't get to talk with the same expert each time. You need a continuing relationship with one professional who knows all the details of your situation. TurboTax Live Full Service might be an option, but the fact that TurboTax does not support a necessary form is probably a deal-breaker. Also, I don't know how much choice you would have about the professional who is assigned to you. You're better off with a local professional whose qualifications and attitude you can evaluate before you make a choice.

[turbosl2]

Thank you very much! I was contemplating turbo tax full service. Still unsure. My only reason is I am very detail oriented and save electronic copies of my taxes since 2007 organized my year. 

yes you hit the nail on the head. New LLC and everything, purchased assets. Paperwork is simple but was going to detail out what those assets were. I am the only sole member of the LLC and wanted to file my own taxes with a schedule C for the business.

I do a detailed P&L every month but in all honesty I am not a CPA and there are a few items on that P&L that I am not sure where they go.

e.g

1.) The payments I make to my 401k and the previous owner for the remaining balance that is owner financing. (Leave this off and just come up with a depreciation number at EOY or month by month?) These are bills that the business incurs so I would hope I don’t have to pay tax on “profits” that I really don’t have. All profits are going to payoff the financing ASAP. 
2.) What the best method of depreciation would be? For instance I am working to pay off the 180k in 18mon. Any profit the business make I write a check to the previous owner or pay my 401k loan…leaving nothing left over in the bank beyond the initial deposit I put in for operating cash flow. 

it would be a shame if I had to pay tax on all that money because it’s seen as profit becuase I want to be debt free ASAP and the previous owner doesn’t want to wait 5-7yrs for the rest of his money.

Beyond that I THINK (lol) I have everything under control