Checklist for IRS Form 4562: Depreciation

Before signing your tax forms and sending them to the IRS, use this checklist to spot potential errors on IRS Form 4562 Depreciation and Amortization.

[]  Part I: Did you purchase any furniture, appliances or equipment that was used more than 50% in your business? If so, you can use the Section 179 rule in Part I and deduct the entire business portion.

[]  Line 14: If you bought new furniture, appliances, equipment, fences, patio or a driveway, you are eligible for the 100% bonus depreciation rule.

[]  Line 17: If you began depreciating items before the current tax year and haven't fully depreciated them yet, enter the depreciation deduction for these items on line 17.

[] Line 19c: If this was your first year in business, you are entitled to depreciate the value of all of your household items that you owned before you went into business and started using in your business. Such items can include: furniture, appliances, office equipment, bedding, kitchen dishware and utensils, house decorations, curtains, rugs, tables, chairs, and so on. These items should be claimed on line 19c. Here's an article that explains how to do an inventory of these items.

If you didn't claim depreciation deductions for these items in earlier tax years, you may be able to use IRS Form 3115 Application for Change in Accounting Method to recapture previously unclaimed depreciation.

[]  Line 19i: If you made a home improvement, depreciate this expense over 39 years on line 19i.

[]  Lines 24a and b: Did you check "yes" next to the boxes on lines 24a and 24b? If not, it could trigger an audit.

[]  Lines 26 and 27: If you purchased a computer or other office equipment, enter the expense on either line 26 or 27, depending on whether you used it more than 50% in your business. If you purchased it new and used it more than 50% for your business, fill out line 25 to claim the 100% bonus depreciation deduction.

[]  Lines 30-36: Fill out lines 30-36 if you used your vehicle in your business.

Tom Copeland - www.tomcopelandblog.com

Image credit: connectingpointonline.wordpress.com

For more information, see my Family Child Care Tax Workbook and Organizer.