How to Book Section 179 Depreciation in QuickBooks

Well, of course it is tax day and I need an accountant or QuickBooks specialist to help me.  I have an internet company since 1997. It's been in QuickBooks since 2002 when I went Corporation (til 2004).  Prior it was Sole Proprietor, and now it is also SP.  This internet company made a whopping $5k in sales last year. My expenses basically made it break even.  My biggest problem is that I started a new company, a Photography business. I have $0 sales for 2009. Mainly because I was building my portfolio doing free work, but also because I need to get my ducks in a row with accepting tax for the products I will sell. I incurred about $7200 worth of expenses that I paid on my own.  When I put all these numbers into turbo tax it gives me a red flag. But, that is because I put them all under the internet company. I should break them down to the photography biz I guess….. which I now have done in QuickBooks. Going to add a second company in Turbo Tax and then re-input the expenses and see what it says. I have no idea "how" to claim the equipment. I know in the past I have taken a 179 deduction so I don't have to do the amortization way. Is that right? Well that is what my accountant did to some equipment in 2004. In my QuickBooks I have my photography biz. The only reason mainly is because I downloaded transactions from PayPal which were some expenses, so I wouldn't have a clue where to move those to (in a new company for the photography). Although, ideally, I would love to start a new company for photography & get things categorized right.  Here is my P&L, if you can make any sense of where I might be having a problem.  I know  how to work QB. I know how to input stuff. I just need guidance of where to put things and why, so in the future I can put them in the right location. And, so I know how to take equipment deductions, because, quite honestly, there will be many other equipment purchases in the future (lenses, studio lights, etc.) Do I need a CPA? Is this something you would provide services/help understanding? I am tempted to just file an extension with the IRS  because I hate to send them it all the wrong way.
I’m not a tax advisor, so you should run this by your CPA, but the IRS does require you to file a separate Schedule C for each sole proprietorship (see page C-2 on the IRS’ Schedule C instructions).

If both your companies are sole proprietorships, you can use one QuickBooks file and create classes to track their separate revenue and expenses.  This is particularly handy if you’re using the same checking and/or credit card accounts for both businesses.  Having separate files sharing a checking account would be a bookkeeping nightmare!  If classes aren’t turned on in your file yet, go to Edit > Preferences > Accounting > Company Preferences and check the box next to Use class tracking.  Then go to Lists > Class List, click the Class button and select New and create a class for each of your businesses.

You should book your equipment purchases to a fixed asset account.  If you know for certain you’ll be fully depreciating them using Section 179, you can also create a depreciation expense offset by an Accumulated Depreciation fixed asset account (which always has a negative balance).  You can either do this as a journal entry (debit the expense account and credit the accumulated depreciation account) or right on the bill or check you used to purchase the equipment.  In this case, you’d enter a positive amount for the equipment fixed assets account, a negative amount to the accumulated depreciation account, and a positive amount to the expense account. 

I’d call the depreciation expense something like Section 179 Depreciation so it’s clear what it is especially if you have any regular depreciation that can’t be fully depreciated using Section 179, like vehicles.

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This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. For further information, please consult appropriate professional advice from your attorney and certified public accountant.

Ruth Perryman - QuickBooks Specialist Written by +Ruth Perryman

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8 Responses to How to Book Section 179 Depreciation in QuickBooks

  • I heard thru a Webinar, QB 2012 has a new feature that is not found on early QB versons. The feature allows me to create a .qbw or .qbb file containing 1 or more years. Prior of version would not allow selecting certain years. Is this correct?

    • Hi Joe,

      Yes, it’s called a period copy. However, it’s only avalable in the Accountant edition of either QuickBooks Premier or QuickBooks Enterprise.

  • I use QB Pro 2011 installed on my harddrive. One of my clients uses QB online and is considerng hiring me to setup his S-Corp via QB online. Do I have the same features with the QB online as I do with my QB Pro 2011?

    • Hi Joseph,

      QuickBooks Online is entirely different from the desktop versions of QuickBooks. You can convert a desktop file to online, but it doesn’t always go perfectly. I recommend having your client add you as an accountant usr to his online account and set it up online instead.

      Just to warn you – you’re probably going to dislike the online version. Most desktop users don’t like it at all.

  • How does one create a AAA acct within an S-Corp acct within QB Pro?

  • Upon reading your “How to Book Section 179 Depreciation in QuickBooks”, we try to utilize the QB bridging to ProSeries and we could not figure a way to enter assets into QB via Schedule C account for which they could be mapped and then imported into ProSeries. Is there a way?