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Discussion Forum Index --> Tax Questions --> Can I 179 equipment purchased for band / sound business
Paparich (talk|edits) said:
| 2 September 2006
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| I am considering an early distribution from one of my 401k's. I guess my question is two fold, Is the equipment used in an entertainment business such as a band and sound reinforcement, and the vehicle for transporting, eligible for 179, and also, can a 179 deduction be used to offset the taxes incurred from an early distribution. ( not the 10% penalty )which will end up putting my income in the $170,000 range for the year. Thanks
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Death&Taxes (talk|edits) said:
| 2 September 2006
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| You can claim the 179 deduction for the equipment mentioned though the van might have limitations based on weight and personal usage. The business must be in operation. If the equipment is used in a pass through entity such as an S Corporation you might find your deduction limited, but if you are operating as a proprietorship or one-person LLC reporting your inocme on Schedule C, you should be able to deduct up to $105,000 of equipment under Section 179 and the loss from this will partially offset your income from the distribution.
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Jdugancpa (talk|edits) said:
| 3 September 2006
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| I did not check any references on this, but I did plug some numbers into ProSeries and the answer in Pro Series comes out as I expected. You cannot create or increase a loss with Sec179 deductions. So you can offset any Sch C income with the 179 and IF you have wage income you can offset that with Sec 179. (Wages count as business income). So the technical answer to Paparich's question is, No, Sec179 cannot be used to offset the retirement distribution. But if in addition to the retirement distribution you have wages, the 179 can be used to offset wages.
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Death&Taxes (talk|edits) said:
| 3 September 2006
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| You are right; I used a client's return, creating a new file, but forgot he had a large W-2.....duh, sometimes I write without thinking.
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Paparich (talk|edits) said:
| 15 September 2006
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| Thanks, So if my wages = 100,000 and distribution = ~60,000, I can 179 against the 100,000 or my AGI ?( not counting the distribution)And would AMT come into play and limit my 179 or is that 2 different animals? the business is already active, it is a proprietership, I imagine I would have to get a business ID or something to that effect.
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Death&Taxes (talk|edits) said:
| 15 September 2006
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| Too little information to tell about AMT. Your ostensible 179 limit will be $100,000 plus any profit from the business before the 179 deduction, but 179 is limited to 105,000. Do yourself a favor and find a professional.
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CrowJD (talk|edits) said:
| 15 September 2006
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| Papa, besides the points made above, you need to treat this as totally separate from your assets, i.e. separate business checking account, separate records, etc. Sounds like this is going to end up on a Sched C. at this point, all the more reason to get some professional help as the Sched. C. will raise your audit profile with the IRS (it's attached, and linked to the 1040). So, with this being the kind of enterprise that could "appear" to be a hobby, you've got to watch your compliance pretty closely.
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Paparich (talk|edits) said:
| 17 September 2006
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| I absolutely agree with the finding a professional. And I have tried. easier said than done, and any tips you might have for me I will gladly consider. I want someone who has experience and knowledge in this area that can let me know what I can do and can write off and take an active approach to helping me instead of reactive. make creative yet productive (not illegal) suggestions. I have asked "feel out" questions on the phone with 2 cpa's and was not happy with knowledge level in this area, I spoke to a third that would not discuss anything but for $100 would schedule me for an initial consultation, and then several others I got answering machines. If I find the right person, I dont have too much of a problem with $100 initial consult. Although it does seem a little steep to me, especially when I dont yet know what I'm getting. And I dont want anyone to take this the wrong way, I expect I may be looking for somewhat of a specialist and not a cookie cut type. Dont hate me for it:)
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CrowJD (talk|edits) said:
| 18 September 2006
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| Why don't you trying running a search for National Society of Accountants, or search for National Association of Tax Preparers, or National Association of Enrolled Agents...any of these would be fine; and just be honest with them that you want some extra handholding early on, and do they have time to communicate with you etc. All of these sites have the ability to search for people in your state. Generally speaking, a person with at least 7-10 years (or more) of experience will be the most practical and efficient. Frankly, I don't think you will need an entertainment tax or accounting specialist at this stage; of course, if you are looking for this kind of specialty, you can expect to pay for the expertise.
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Michaelstar (talk|edits) said:
| 18 September 2006
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| Sounds to me like you will not be happy unless you use "someone in the business". While I might not really agree with this concept that really has nothing to do with the entertainment types that you are going to be associated with and will convince you otherwise. It is just part of the "entertainment" scene - been there - lost a client or two - and later they have come back wondering why - oh well. Ask around for a CPA with at your gigs. You should be able to find someone (or two) to interview. Most of us here do not seem to be in the "entertainment business". One gets what they pay for so do not cheap yourself out for $100. Also ask who are "their other clients" and call them up and see if they are happy with the service - if it is this entertainment business you seek. Good Luck - it is a tough business - one word of advise - do not go out and spend $300-$500K on a dream unless your really good otherwise you'l just end up with an NOL!
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Paparich (talk|edits) said:
| 18 September 2006
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| Good advice / suggestions from both of you..... thanks
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Death&Taxes (talk|edits) said:
| 18 September 2006
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| I was one of three people to give a seminar for musicians and artists for NARAS in Philadelphia ten years ago and met another professional whose speciality was the music business. Papa, if you are near Philly, write me privately and I will give his name. I do many freelance musicians, but mostly of the classical stripe. The last one finished was a couple where he played bass, she the violin, and there were 27 W-2 forms, 16 1099s, 5 states and their gross income for Line 7 and Line 1 Schedule C was less than 90K, including a considerable amount not on either W-2 or 1099. Returns like these almost always go on extension because of the sheer volume of data-entering.
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Paparich (talk|edits) said:
| 18 September 2006
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| Thought you might want to know, I went to the NSA website, learned what those abbreviations mean ie.. ABA (which is what I need) did a search using ABA and my city on NSA and called one of them (3 came up)...we talked for 15 min or so and I found my accountant...thanks again. But hope you guys dont mind if I pick your brains from time to time.
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