A small business distinguishes between items purchased for the short term and long-term expenditures, both in accounting and in taxes. Capital expenditures are business improvements, upgrades or expansions. A capitalized expenditure is primarily a tax term, reflecting depreciation for loss of value over a period of years.
Use Form 1040-ES â You can calculate your quarterly estimated tax payment using Form 1040-ES (the same form used to pay estimated taxes), which includes a worksheet that helps you estimate how much you owe for the current year. Corporations should use Form 1120-W to calculate estimated taxes. Refer to Last Yearâs Return â If you have been in business for a while, you can refer to your previous year's federal tax return.
1. Use Form 1040. If the legal expense is a business expense, you may deduct it on IRS Form Schedule C (Form 1040), line 17 or Schedule C-EZ (Form 1040 or 1040-EZ). 1  If the expenses are personal, you can itemize the expenses on the same form, or take the standard deduction, depending on your situation.