How to Get Your Small Business Tax Ready | Business Assets
In our last segment we discussed maximizing your home office tax deduction. The fifth step in getting your small business tax ready is making sure you are correctly reporting your business assets.
Business assets are found on your balance sheet and not the profit and loss statement. These business assets are items which will be useful for more than one year. The IRS has determined that certain items purchased for use in business will not need replacing for several years, and depreciation calculates the portion of the cost that can be expensed in the current year.
Business assets include:
- Tools and equipment
- Office furniture and equipment
When reporting your business assets, you will need:
- Total cost of the item including all expenses needed to put the item into working order
- The date you began using the item in your business
- Whether the item was purchased new or used
The paper work for business assets along with a copy of the annual depreciation schedule from your tax return should be kept in your current year filing system until the year in which the item is disposed.
When a business asset is disposed, you need the date and any money received if sold or how the item was disposed of if it was not sold. Paper work from purchase and sale of item is included as backup in that year’s tax return.