Startup costs

[pito]

What is the name of your state? IN

I am a sole. When I started business, I created a new bank account. I did/do funds transfers into/out of this account. Since everything is filed as an individual, and Sch C is accurate, is it really necessary to capitalize the money I use to keep the bus. acct. in the black?

 

[seniorjudge]

What is the name of your state? IN

I am a sole. When I started business, I created a new bank account. I did/do funds transfers into/out of this account. Since everything is filed as an individual, and Sch C is accurate, is it really necessary to capitalize the money I use to keep the bus. acct. in the black?

Why would you not?

 

[LdiJ]

What is the name of your state? IN

I am a sole. When I started business, I created a new bank account. I did/do funds transfers into/out of this account. Since everything is filed as an individual, and Sch C is accurate, is it really necessary to capitalize the money I use to keep the bus. acct. in the black?

Unless you have serious inventory then you are a cash based taxpayer. That means that income in is counted in the year you recieve it, and expenses are counted in the year that you pay them.

However certain outflows of income must be depreciated/amortized/capitalized. You don't necessarily have to capitalize money used to keep your business account in the black, but you do have to depreciate/amortize/capitalize those items that require that.

For example, if you purchase a piece of equipment that you cannot legitimately 179 expense, then you may have to depreciate that equipment. It might put your business account into the red to buy it, but that doesn't mean that you will necessarily be able to expense it fully in the year that you purchased it.

Go get yourself a consult with a local tax pro...someone who can examine what you have and advise you how to handle it.