Fixed Asset, Expense or COGS - Sub $500 business items to keep track of

Kyanite · ‎December 10, 2018

I have a lot of sub $500 items I buy for use in my business. They could be considered equipment or tools. I may keep them beyond a year or sell them. I wanted to keep track of them as inventory items because I can easily print a report of what I own, and see a total of their retail value.

Would these be better to keep track as fixed assets? If so could would I use the "furniture and equipment" fixed assets account when I purchase them? Would my account be able to do a group depreciation on all these items if there is a lot of them or does depreciation have to be itemized? They are quite small, sub $500 value.

qbteachmt · ‎December 10, 2018

For the final 2013 statement, the IRS announced that the de minimis safe harbor threshold would be increased to $2,500 beginning with 2016 tax years. The dollar threshold for taxpayers with an AFS (a typical financial statement stating your capitalization policy) remains at $5,000.

"I wanted to keep track of them as inventory items because I can easily print a report of what I own, and see a total of their retail value."

You don't want them as Inventory Asset.

"Would these be better to keep track as fixed assets?"

Yes, or just expense them.

In QB, what you are asking is to use a Purchase item that is Noninventory; set it up as Two Sided. Name it for "small equipment" and link the left side to Supplies Expense and the right side to Income. Use it generically, when purchasing, and then in Description on the purchase, list what you bought. Use that same Item when you sell it.

Please see my attachments for Counters and Appliances. Same concept.

View solution in original post

qbteachmt · ‎December 10, 2018

For the final 2013 statement, the IRS announced that the de minimis safe harbor threshold would be increased to $2,500 beginning with 2016 tax years. The dollar threshold for taxpayers with an AFS (a typical financial statement stating your capitalization policy) remains at $5,000.

"I wanted to keep track of them as inventory items because I can easily print a report of what I own, and see a total of their retail value."

You don't want them as Inventory Asset.

"Would these be better to keep track as fixed assets?"

Yes, or just expense them.

In QB, what you are asking is to use a Purchase item that is Noninventory; set it up as Two Sided. Name it for "small equipment" and link the left side to Supplies Expense and the right side to Income. Use it generically, when purchasing, and then in Description on the purchase, list what you bought. Use that same Item when you sell it.

Please see my attachments for Counters and Appliances. Same concept.

qbteachmt · ‎December 10, 2018

Here's the notice: Notice 2015-82, issued on November 24,2015, increases from $500 to $2,500 the de minimis safe harbor threshold for taxpayers without an AFS. The threshold increase is effective for taxable years beginning on or after January 1, 2016.

john-pero · ‎December 10, 2018

<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-drop/n-15-82.pdf">https://www.irs.gov/pub/irs-drop/n-15-82.pdf</a> and in typical IRS fashion the actual effectivev ruling comes at top pf page 5 of 5.

john-pero · ‎December 10, 2018

You can , for record keeping outside of QB group together like category assets purchased at same time for depreciation calculation. But keeping track of your depreciable assets and the yearly deduction is usually best outside of QB and just carrying total accumulated D in QBoston.

Here is the rub. Since 2013 when the IRS got hard nosed about de-minimis and set the $500 threshold they also said you cannot pick and choose, meaning as I see it, I'd you wish to d ed predicate 1 under 500 purchase you have to depreciate all of them acquired that year.

And you have to declare with last year's tax return how you were going to treat items this year. I don't know if this means that with no declaration that $1 items as well ad $499 items are depreciated or expensed.

Unless this is inventory that might reasonably be resold in 12-18 months I would expense it and use a spreadsheet to keep track of it.

In fact after reading up a little I have to ask my CPA why I am placing $300 stoves and refrigerators (replacements for apartments) as assets.

makerlyme · ‎July 14, 2020

I have a similar problem. Small Tools less than $1000 are expensed, but the nonprofit client is a community workshop so has a lot of uncapitalized assets of this type. Many could be used for 20 years! Could they go in the expense account, but then at yearend somehow be journaled to an "Inventory - Small Tools for Use under $1000" so that they show in the balance sheet? They are actually worth more than all the capitalized assets. Or as someone mentioned, just keep track of them separate and add a note to the yearend financials?

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Fixed Asset, Expense or COGS - Sub $500 business items to keep track of