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Old 01-17-2014, 12:00 PM
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Business Asset Inactivity

I claimed a dumptruck on my 2011 return. Placed it in service on 01/01/2011 for my dirt hauling business. I did not work in 2012 for myself. I took a job through a company that offered benefits, etc. I have no income to report on schedule C, but have remaining depreciation to claim. I took $2,800 in 2011, no sec 179 and no bonus depreciation. I used MACRs 200 DB HY five years for the dumptruck. I have not disposed of the dumptruck and eventually plan on hauling dirt again part time once my full time job slows down. I am not sure if I should "retire" the asset for now or keep depreciating even though I have no self employment income. Do I have to file anything on my 2012 and 2013 returns for my business or just my W-2? I have not filed 2012 taxes yet.



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Old 01-17-2014, 07:37 PM
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Originally Posted by miltfel View Post



#1;I claimed a dumptruck on my 2011 return. Placed it in service on 01/01/2011 for my dirt hauling business. I did not work in 2012 for myself. I took a job through a company that offered benefits, etc. I have no income to report on schedule C, but have remaining depreciation to claim. I took $2,800 in 2011, no sec 179 and no bonus depreciation. I used MACRs 200 DB HY five years for the dumptruck. I have not disposed of the dumptruck and eventually plan on hauling dirt again part time once my full time job slows down. I am not sure if I should "retire" the asset for now or keep depreciating even though I have no self employment income.

#2;Do I have to file anything on my 2012 and 2013 returns for my business or just my W-2? I have not filed 2012 taxes yet.

#1;UNLESS you file SchC/Sch C-EZ, you actually do/can’t not need to depreciate the asset as there is no taxable biz related income to be lowered by your annual depre of the asset, the dumptruck. Even if you constinously deprecaite from the remaining useful lives, you, UNLESS you file Sch C with self employment income, can’t actually deduct your annual depre to lower your tax laiblity.So on general, as long as yu have self employment income reported on your Sch C, it does not make sense to skip a depreciation deduction because the IRS imputes depreciation, meaning that even if you don't claim the depreciation against your property/assets, the IRS still considers the aset’s basis reduced by the unclaimed annual depreciation. You have the same adjusted cost basis for selling your asset/ depreciable property whether you claim the depreciation deduction or skip it. Because of imputed depreciation, you may as well claim depreciation, even if you can't use it this year. You can carry biz loss deduction forward to your future tax returns when you file Sch C with self employment income. You should be showing your depreciation as a loss as long as you file Sch C, because when you sell the asset the IRS requires that you recapture depreciation, sec 1245 recapture rule, whether you claimed it or not. In other words, when you sell this the truck, your gain will be figured by taking your selling price less the price you paid for the property and then adding back in the depreciation you claimed or could have claimed.
Bottomline; In the case of deferred depreciation, a taxpayer wants to put depreciation expenses off for the current year and take the expense in a future year. There is no such thing as deferred depreciation. Depreciation as an expense must be taken in the year that it occurs as defined by the IRS guidelines, whether you choose to claim it as an expense or not. Because it is constantly occurring each year, it is best to claim depreciation each year, whether it helps you out or not because you can not take it in a year when it does not occur.


#2;You need to pay tax only on your W2 salary as an EE as yousaid,” I did not work in 2012 for myself. I took a job through a company that offered benefits, etc. I have no income to report on schedule C”. So no Sch C, no self emoployemnt income , and No SECA tax. You , for 2012 tax year, need to pay FICA taxes, soc sec taxes, to the IRS.



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Old 01-18-2014, 06:56 PM
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I asked a CPA yesterday who told me to file schedule c with $0 business income and take the depreciation on the dumptruck. She said it was considered idle property and it would nothrow up a red flag if I didn't claim business income. I am really confused now. From what I gather from #1 is that this is not possible.



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Old 01-18-2014, 07:28 PM
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Originally Posted by miltfel View Post
I asked a CPA yesterday who told me to file schedule c with $0 business income and take the depreciation on the dumptruck. She said it was considered idle property and it would nothrow up a red flag if I didn't claim business income. I am really confused now. From what I gather from #1 is that this is not possible.
what the CPA means is that you, as log as you are engaged in your self employment biz as part time/ full time opearator, need to file yur Sch C/Sch C-EZ with $0 biz income to claim your NOL on your return;when you have a business and your expenses exceed your income for the year, you may have a net operating loss for the year.Then, you may deduct the NOL in the carry back years back to 2 years if it is to your tax advantage to do so. If the NOL is not completely absorbed in the prior years, carry over the unused NOL to future years for the next 20 years. Alternatively, if you foresee being in a higher tax bracket in the subsequent year, you could elect to carry the entire NOL forward.
To claim your biz losses, you need to file your Sch C even if you have no self employment income as you still incur your bix expenses. Please contact a CPA/an IRS EA in your local area for professinal help for your fed/state returns.





As I said, remember: UNLESS you file SchC/Sch C-EZ, you actually do/can’t not need to depreciate the asset as there is no taxable biz related income to be lowered by your annual depre of the asset, the dumptruck.



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