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Quickbooks Self-Employed Apps Software Category

Forum|Forum|4 years ago
September 2, 2021
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I've searched probably 10 different ways and am not seeing a direct answer for my question: if I have a software subscription (cloud-based service) that's paid monthly but the annual cost would be over $200, would I use the Apps/Software/Web Services (> 200) category or just "Apps/Software/Web Services"? I couldn't find anything that defines the difference in detail between these two categories.

QuickBooks Self-Employed

Best answer by john-pero

Your monthly software subscription (even if you paid for it annually) is a service item and is fully expensed as paid. Only software (>$200) that is not of a subscription basis is considered an asset. Say you buy Windows 10 (or the new 11) to install on a MAC, that would be an asset, not only is it not included in the computer price it is a one-time purchase. OTOH, buying an annual membership to Office 365 is only good for a year at a time and is annually repeated- it's lifespan is strictly limited to 1 year or less.

Even if you "buy" a desktop version of Quickbooks, which has a lifespan of 3 years, you could easily argue that (according to the EULA which nobody reads) you do not own the downloaded software and never will. Even with a one time price and good for 3 years of updates you are only 'renting" the software from Intuit and they can pull your license at any time. Their EULA is almost exactly like your Kindle or Nook license - you do not own a single e-book you downloaded - ever!

Som back to your MONTHLY subscription to QBSE, it is good for only one month and one month only. If you do not pay for the next month they can pull the plug on you. Live SAAS (software as a service) falls into the same arena as your actual internet connection. Certainly, you pay more than $200/year for Spectrum or Xfinnity but you do not depreciate that monthly subscription.

The only time that subscription based expenses must be allocated are when the subscription payment crosses over the fiscal year. And

R

ReymondO

Hi there, @alict1.

I'll share with you some insights with regards to differences between the Apps/software/web services & Apps/software/web services - >$200.

The main differences between these two are how they will appear on tax reports. Both of these categories appear on Tax Details and Tax Summary reports. The Apps/software/web services are categorized as Other business expenses while the Apps/software/web services - >$200 is under Business assets.

For the Profit & Loss report, only the Apps/software/web services will appear. The Apps/software/web services - >$200 won't be included in this report since this is an asset and is handled on annual taxes as a deppreciable asset.

To get more details, you refer to this article: Learn how Schedule C categories appear on reports

Additionally, you can check the IRS website to get the most up-to-date Schedule C info.

Let me know if you need further questions. I'm always around to provide answers and clarifications to your questions. Have a great day ahead and take care.

A

alict1Author

Hi Raymond. Thanks for this info but it doesn't fully answer my question but I have a guess now. Let me give you an example to be more clear: for cloud-based software subscriptions like Quickbooks Self-employed, Adobe, cloud backup service, etc, which category do I use? I'm guessing these aren't considered an asset? Is it that only software that you purchase and install on your machine is considered an asset?

katherinejoyceO

Thanks for coming back for more support, @alict1. I'm here to guide you in categorizing your transactions in QBSE.

You'll want to tag these transactions (cloud-based software subscriptions like Quickbooks Self-employed, Adobe, cloud backup service, etc.) under the Business expense category.

And yes, the software that you purchase and install on your machine is considered an asset. You also have to claim as an asset for the machine you purchased that costs more than $2,500.

You can check out this link to learn more about how you can categorize your transactions: Schedule C categories in QuickBooks Self-Employed.

Additionally, I recommend reaching out to the Answerxchange Community for tax advice. It's is a public forum where you can interact with tax experts and other financial advisers.

For future reference, I'll leave you with this article to help you learn more about getting your tax data from QBSE each quarter or at the end of the year: Get tax info from QuickBooks Self-Employed.

Let me know if you have additional concerns. I'm always around to help. Take care!

john-peroAnswer

Your monthly software subscription (even if you paid for it annually) is a service item and is fully expensed as paid. Only software (>$200) that is not of a subscription basis is considered an asset. Say you buy Windows 10 (or the new 11) to install on a MAC, that would be an asset, not only is it not included in the computer price it is a one-time purchase. OTOH, buying an annual membership to Office 365 is only good for a year at a time and is annually repeated- it's lifespan is strictly limited to 1 year or less.

Even if you "buy" a desktop version of Quickbooks, which has a lifespan of 3 years, you could easily argue that (according to the EULA which nobody reads) you do not own the downloaded software and never will. Even with a one time price and good for 3 years of updates you are only 'renting" the software from Intuit and they can pull your license at any time. Their EULA is almost exactly like your Kindle or Nook license - you do not own a single e-book you downloaded - ever!

Som back to your MONTHLY subscription to QBSE, it is good for only one month and one month only. If you do not pay for the next month they can pull the plug on you. Live SAAS (software as a service) falls into the same arena as your actual internet connection. Certainly, you pay more than $200/year for Spectrum or Xfinnity but you do not depreciate that monthly subscription.

The only time that subscription based expenses must be allocated are when the subscription payment crosses over the fiscal year. And

A

alict1Author

Thanks John - this is exactly the detailed information I needed, It explains what a software subscription license is and therefore why it would not be considered an asset or in the Apps/Services > 200 category, even if the annual cost is > 200, versus purchasing software for my machine. It would be helpful to have this in the category description for these two categories, which are pretty vague right now.

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