IRS Form 4562 walkthrough (Depreciation and Amortization)

[@pyrexsluts1815]

Working on a Tax Return project for my class and this video has been very helpful!

[@teachmepersonalfinance]

Please feel free to check out our article, where we've written step by step instructions to help you walk through this tax form! www.teachmepersonalfinance.com/irs-form-4562-instructions/ If you’re looking for tutorials for other IRS Forms that you can file directly through the IRS website, check out our free fillable forms page: www.teachmepersonalfinance.com/free-fillable-tax-forms/

[@neelbhatt4]

Can you show how to fill this out for a rental property that you also reside in?

[@caseyt9713]

Hello sir, can you please do a video in the case of filling it in for an STR? Would be great to do it specifically for accelerated depreciation on an STR using the information from a cost segregation study. Also would be nice to see how you show the STR as ‘active’ to offset W2 income via the schedule E once you input this info into it. Thanks!

[@avasdv]

Where does catch up depreciation go when doing 3115 change of method? I screwed up my basis when switching accounting software and carried that 3 years (double deducted land)

[@lisapippinbt738]

Please do a breakdown of this form on another video. That would be so appreciated. Thank you for your amazing videos.

[@mattsmithh2445]

Hi, Did you make a video completing form 4562, electing to expense the "total cost" of a vehicle via Section 179? No depreciation schedule.

[@rudresheattinmani160]

It's so informative, requesting you to make videos on Form 5471, 5472 and Form 8865

[@teachmepersonalfinance]

Thank you! I'm not sure when I can get around to the others, but here is the walkthrough video for IRS Form 5471: kzbin.info/www/bejne/Z3-9o4upZ9lob7M

[@CruisinComPTon]

I had 4 business vehicles on this form using H&R's software. When I went to file, the software stated that since I had more than 3 depreciate assets listed, I couldn't file electronically. I deleted the form and started over, but as I added vehicles, my return amount went lower. Adding only 1 vehicle gave me the highest return. What am I missing?

[@muthuradha853]

Hello, Thank you for a detailed video and God bless. Please advise us which method I should use for a 15 year cost segregated property on my tax return. Is that "SL or QIP" Method that I should use? Thank you.

[@sumyatei]

Thank you so much!

[@virgilrodriguez8113]

Good morning, I filed form 4562 for the 2022 tax year, where do I input the 2nd half of the Half -Year Convention for this year? Thanks

[@teachmepersonalfinance]

You would need to know the depreciation schedule (3 years, 5 years, or 7 years). But generally, you'll enter depreciation on items placed into service in prior tax years on Line 17, unless otherwise indicated. You may want to use the depreciation worksheet in the form instructions to keep track of depreciation year over year.

[@nes7687]

Hello , I just sent you an email. Last year I decided to use my pickup truck 100% for the business and a friend told me that I should look into the Vehicle Depreciation form . Your help will be greatly appreciated.

[@Tiffany.B.]

Hello can I depreciate and deduct other expenses on the schedule c such as professional fees and insurance etc?

[@teachmepersonalfinance]

Expenses such as professional fees and insurance can be deducted directly on Schedule C, without having to file Form 4562. This form is for calculating depreciation on items where the expected life is more than one year (i.e. cars, office equipment, etc). For example, if you bought a car for $20,000, you could not take a $20,000 tax deduction in the year you bought it. Rather, the IRS would expect you to depreciate it over 5 years.

[@CorneliusConway-y1d]

how does this depreciation populate to QuickBooks (for example) if you're looking to transfer the depreciation schedule and and show depreciation on a month over month basis? Thanks!

[@teachmepersonalfinance]

I'm not exactly sure what you mean by this question. Are you asking how to transfer information from IRS Form 4562 into Quickbooks, or were you asking a different question?

[@CorneliusConway-y1d]

Exactly, how do I show the depreciation from schedule 4562 in QuickBooks@@teachmepersonalfinance

[@ikungekume4134]

Focusing specifically on the amortization section. How would the startup costs from 2022 be reflected in the next years 2023 form? Assuming you didn't do anything in the business this year.

[@teachmepersonalfinance]

From the form instructions: If you are reporting the amortization of costs (other than research and experimental expenditures) that began before your 2023 tax year and you are not required to file Form 4562 for any other reason, do not file Form 4562. Report the amortization directly on the “Other Deductions” or “Other Expenses” line of your return.

[@Talkingshit4]

I have startup cost from year 2022 and startup cost in 2023 , my business became active in 2023 . I deducted 5000$ for the 2023 cost on my 2023 tax year and I amortized the rest , but when I tried to amortize the 2022 costs , they somehow ended up in other expenses, is that ok or I messed up something ? ( i didn’t file yet )

[@teachmepersonalfinance]

@@Talkingshit4 I'm not sure I could help you without actually being able to sit down and look at your files. As a business owner, it might be worthwhile to hire a tax professional to take a look at this to make sure that your expenses are amortized correctly. Would you like me to give you the names of a couple of people who can help?

[@BenjaminvonCramon]

With a purchase listed under MACRS in one year, and another purchase listed under MACRS in the following year, where on 4562 is the deduction carried over from the first year reflected in the following year?

[@teachmepersonalfinance]

I don't see a place where MACRS deductions are carried over. Section 179 expense that was disallowed due to business income limits are carried over on Line 13, then reported on next year's Line 10. However, if you're referring to the remaining basis of the asset that you placed into service previously, you would enter the depreciation on that first item in Line 17. To calculate the amount of depreciation deduction, you would need to follow the form instructions for Line 19, Column G.

[@BenjaminvonCramon]

Okay, thanks for that, kind of got that from your video, somehow also heard there'd be something on 17 that first year, but no, it's only whatever MACRS items are playing out from previous years, just refer to previous tax years 4562, add them up, one figure on 17, yes? I now realize that last year I filled this out wrong on a 4562. It wasn't caught by IRS, so do I gloss over and adjust for the error moving forward, or do I file some type of correction form to clean this up? I applaud your super detailed explanations and thoroughness, a fine balance between plowing too fast through the dense tax code and going too deep. Kudos.

[@teachmepersonalfinance]

@@BenjaminvonCramon I believe the correct answer would be to file an amended tax return with the correct adjustment. That would allow you to carry your basis forward to this year's return. If you do nothing now, the IRS may (or may not) come along and make the necessary adjustment, then hand you a bill for the difference (plus interest). They usually do this 1-2 years after the year of your tax filing. So I might expect that within the next year or two for this return. My concern would be that if you don't make the correct adjustment in your 2023 filing, then the IRS might have a different opinion on whether you did that correctly as well. Before making a decision, you might want to get an opinion from a tax professional to see whether it's worth the cost of filing an amended return (depending on how much the depreciation difference is, and the impact on your taxes).

[@BenjaminvonCramon]

Thanks, will fill submit a 1040 X, live and learn. Again, many thanks.

[@exploringgodscountry]

Curious, does a person HAVE to deprecate assets in a year where they have a loss? I had a terrible year last year and I don't want to ride off anything more. I'd prefer to realize the depreciation in a later year if possible where I have profits. These items were purchased in years prior to 2023 and have been getting depreciated on a 7 year schedule. Can I pause that schedule for this year... One a slightly separate note, I think I found a mistake in my CPA's work. He made a deprecation worksheet but didn't depreciate the items in my taxes for 2022. Maybe he was doing this same thing? Although I made a profit in 2022.

[@teachmepersonalfinance]

I cannot find a tax reference that allows you to defer a depreciation deduction in the manner that you are suggesting. That doesn't mean you can't do it, but you might need to discuss this with a tax professional. However, according to IRS Publication 946, you *can* take, in a later tax year, a Section 179 deduction that was previously disallowed due to income limits: You can carry over for an unlimited number of years the cost of any qualified Section 179 real property that you placed in service in tax years beginning after 2015, and that you elected to expense, but were unable to deduct because of the business income limitation. If you think that your current CPA missed the depreciation deduction for a prior year return, then you should ask him whether that was intentional or a mistake. If it was a mistake and he should have taken the deduction, then he should be willing to file an amended tax return at no charge to you. If he is not willing to do this, or if you have reason to suspect that he's not being forthright with you, then you should have another CPA review your tax return and give you a recommendation.

[@exploringgodscountry]

@@teachmepersonalfinance wow so awesome, thank you for taking the time to write me such a detailed response!

[@taxfree4603]

Are you supposed to fill out part 1 before you fill out part 3? Is section 179 a separate depreciation method from MACRS?

[@teachmepersonalfinance]

Section 179 is separate from MACRS. Section 179 allows taxpayers to immediately expense part or all of certain qualifying property placed into service during the tax year. You should complete Part I before Part III, as you will have to reduce the dollar value of property that you depreciate by the dollar amount of your Section 179 election.

[@thetorotek4659]

Maybe I missed but when you are filling out 26 and the maximum Deduction based on the table is 11,200 why did you reduce it to 3000 because of S/L

[@teachmepersonalfinance]

You did not miss anything. When I walk through these forms, I do so for illustrative purposes. In a real tax return situation, I would absolutely use the tables in the form instructions. As I go through these videos, I keep notes on how I will improve upon them in the upcoming tax season. Thank you for pointing this out...I'll keep it in mind when I go through the 2023 video!

[@jseli6829]

If a vehicle was purchased for $50K in 2022 and was used more than 50% for business the first year but second year business use was only 15%. Would the basis be $50K or only $25K? Also, would you fill out line 26 in part 5 for 2022 but then line 27 in part 5 for 2023?

[@teachmepersonalfinance]

For your first question, there's not enough information to answer, since I would need to know how you depreciated the property in 2022. As one example (of many possible scenarios): If you used it for more than 50% in 2022 and you took Section 179 depreciation that year, you'd be able to depreciate it much more than using the typical straight-line depreciation method. Then, you would have to recapture any excess depreciation in 2023 since it's no longer 50% business use. Below is the verbiage in the Form instructions: Listed property recapture. If you used listed property more than 50% in a qualified business use in the year you placed the property in service, and used it 50% or less in a later year, you may have to include as income part of the depreciation, including the special depreciation allowance, deducted in prior years. Use Form 4797, Sales of Business Property, to figure the recapture amount. Without knowing how you took the depreciation in 2022, I can't tell you what your basis should be. However, based on what you've indicated, you would use Line 26 for 2022 and Line 27 for 2023. Below are more resources for Form 4797: IRS Form 4797, Sales of Business Property Article: www.teachmepersonalfinance.com/irs-form-4797-instructions/ Video: kzbin.info/www/bejne/aJaokneGnZ5qkMU

[@jseli6829]

@@teachmepersonalfinance thank you. So the vehicle was purchased in 2022 as a personal vehicle but also used for business purposes. Section 179 was not taken. Depreciation was half year and 200 DB. I use this vehicle for a ebay resell business so the business use percentage varies from year to year. Sometimes it will be more than 50% and some years it will be less than 50%. Does that help?

[@teachmepersonalfinance]

@@jseli6829 That doesn't really help, because there's no information about what depreciation you claimed on your 2022 tax return. Your basis would be reduced by the amount of depreciation you took on your 2022 tax return. Also, once your business use drops below 50%, you have to recapture the excess depreciation you took under the 200DB method. Using a half-year straight-line method, your $50,000 vehicle should have had $5,000 depreciation taken in 2022, then $10,000 in 2023. However, you would have to recapture any of the excess depreciation over the $5,000 SL method available in 2022 for 2023 and future years.

[@marissasevorwell5632]

@@teachmepersonalfinancehello! I am a Tax student in my first semester, and my teacher is very confusing. You have helped tremendously to make things make more sense. If you don’t mind , I have a few questions pertaining to MACRS, is there an email I could email you my questions?

[@teachmepersonalfinance]

@@marissasevorwell5632 If you post your questions here (assuming you don't mind them being public), then perhaps more people will benefit from the answers. However, if you prefer to email, you can send me a note: [e-mail]

[@DS_012]

Can you please come up with detailed information in 5-7 videos ?

[@teachmepersonalfinance]

Are there specific examples of situations you'd want to cover? I could create videos about specific scenarios based on what people would like to see, but I'd need a little more information on what you'd like me to go over in the video.

[@stacyh42167]

Line 11 is not just simply business income. It's business income from all schedules plus short term gains and losses plus adding back the section 179 elected cost, etc. A more detailed explanation of that line's calculation would be appreciated.

[@teachmepersonalfinance]

I totally understand. Our article does go into much detail, specifically the differences between how individuals, partnerships, and S-corporations all should report Line 11: www.teachmepersonalfinance.com/irs-form-4562-instructions/ In the videos, I usually try to maintain a balance between complete explanation and video length, while in the articles, I feel more comfortable taking the additional time to fill in more details.