DEPRICIATION

Forum|Forum|6 years ago
July 15, 2020
8 replies
39 views

Client never claim depreciation in previous years

can we start from 2019 to claim and forget previos years

ProSeries Professional

This topic has been closed for replies.

dascpa

Level 11

The terminology as written is "allowed or allowable" so my answer is no. You can amend the open years to claim the interest but you should not start from day one today. You should report accumulated depreciation as if fully taken. See a good explanation at https://www.irs.gov/faqs/sale-or-trade-of-business-depreciation-rentals/depreciation-recapture/depreciation-recapture-3

dascpa

Level 11

Sorry, to claim the depreciation (I wrote interest).

BobKamman

Level 15

You can forget previous years until the property is sold. And that might never happen -- the client might die, or might gift it to a charity.

T

TaxGuyBill

You need to file Form 3115 with the current year tax return to 'catch up' on the missed depreciation.

If you have never done that before, you may consider a fairly low cost walk-through by another tax preparer. If you Google "Brass Tax Form 3115" you will probably find it.

In the meanwhile, file an extension. 😀

dascpa

Level 11

TaxGuyBill -

For my own knowledge, why would you need a change of accounting method Form 3115 when you are not changing the method? If you amend the returns for the allowable years you have established a method of depreciation. If you do not amend you are just using the correct accepted method in the current year with reporting [not deducted] accumulated depreciation. Thanks for your reply.

T

TaxGuyBill

@dascpa wrote:
TaxGuyBill -
For my own knowledge, why would you need a change of accounting method Form 3115 when you are not changing the method? If you amend the returns for the allowable years you have established a method of depreciation. If you do not amend you are just using the correct accepted method in the current year with reporting [not deducted] accumulated depreciation. Thanks for your reply.

Not claiming depreciation for 2 or more consecutive years sets the accounting method and it is an "impermissible" method of accounting.

So to change to a "permissible" method of accounting, you need to file Form 3115, and that also lets you 'catch up' on the depreciation via a §481(a) Adjustment.

Because the 2 or more consecutive years of not claiming depreciation 'sets' the accounting method, amending is not allowed to correct it.

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