Today TaxMama hears from A.H. in California who is frustrated. “How does one classify video rental inventory in accounting software? This is inventory that depreciates very quickly – the cost of a DVD from a distributor is $17 on average, to have it the day it comes out; but after just 3 months they are worth less than $1. I can’t find any IRS rule specifically for video rental stores.”
Dear A.H.,
Ah, then you’re not looking hard enough.
You’re not the only one running a business like this. In fact, IRS has an audit guide for your specific industry. https://www.irs.gov/businesses/small/article/0,,id=141492,00.html
This link to expenses, describes the depreciation life and method IRS will accept for your videos – straight line over 3 to 5 years. https://www.irs.gov/businesses/small/article/0,,id=141492,00.html#expenses
To learn more about how IRS sees your business, take the time to read the entire audit guide. It’s not that long. And it will give you some special insights on how to stay out of trouble.
Did you know that IRS publishes audit guides for several industries? You can look up yours here:
https://www.irs.gov/businesses/small/article/0,,id=141373,00.html
And remember, you can find answers to all kinds of questions about your industry and other tax issues, free. Where? Where else? At TaxMama.com.
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- IRS Audit Guide :: Video Rental Businesses
- IRS guidelines :: Depreciating Videos in a rental business
- IRS Audit Guides for more industries ::
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