Depreciation

[Foxy-Lady]

I took over doing a 1040C business return.  The prior accountant refuses to provide the depreciation history.  This is what I know:

7-year property 1,000 7 yr recovery MQ conversion 200 DB  $36 for 2017

15-year property $785 15 yr recovery MQ conversion 200DB $10 for 2017

5- year property depreciation deduction $925 for 2017  (based on a printout I think its $18,500 base

Nonresidential 10-2017  $7,313   39 yrs  MM   S/L  $39 for 2017  (That 1 I have no issue)

This business opened around 10/15/2017

2018 shows $7,572 but the accountant did not include the 4562. (based on backup there were no additional assets)

2019 shows 8547 no 4562

I am doing the 2020.  

Any help.  I cannot make the 2017 numbers work.

[dkh]

I'd required the client to bring in the worksheets/data provided to prior preparer.  The assets purchased should be in that information.  From there you hopefully can reconstruct what was done.

[Foxy-Lady]

I have everything she has.  She has been fighting with the tax accountant since January to get her workpapers.  What information I provided is from tax returns and her list of expenditures that were returned to her. 

[Just-Lisa-Now-]

"The prior accountant refuses to provide the depreciation history."

[dkh]

Is there an issue with money owed to prior accountant that's preventing the release of the depreciation?

[TaxGuyBill]

Get the Transcripts and/or copies of the tax returns from the IRS.  That way you can actually SEE the 4562 for all years.

Another problem is that I don't think 200%DB exists for 15 year property.

[sjrcpa]

Does prior accountant give a reason for their refusal? Cliint could complain to the licensing board - i.e. CPA Licensing authority if they are a CPA.

Did you ask? Or did client ask? Accountant is under no obligation to give it to you. They would be prohibited from giving it to you without client's permission.

[qbteachmt]

I did some rough math. I'm good at Excel, but these exist on the web, too, such as:

https://www.calculatorsoup.com/calculators/financial/index-depreciation-calculators.php

The other issue, besides what Bill brought up, is the 5-year a Vehicle? It seems likely there is a % personal and % business, then? Even then, I would have to use 200DB on this, too, to match the numbers you gave for 2017 and 2018.

I used:

5-year MQ 200DB

7-year MQ 200DB

15-year MM SL

39-year MM SL

I got totals for 2017 (1010) and 2018 (7545) okay. 2019, that presumed vehicle doesn't make up the difference, though, unless there is another jump to yet a different depreciation method, with or without a % personal use.

Maybe this is what they don't want you to find out.

[Foxy-Lady]

To the best of my knowledge the account is paid in full

[Foxy-Lady]

Did not think of that for IRS. As for the 200DB it is on the tax form for 15 yrs.

[Foxy-Lady]

There is no car.  The 18,500 is equipment used in the business.

[Foxy-Lady]

The client has been requesting her documentation.  I have not said a word. 

[PATAX]

@Foxy-Lady the client should have copies of the prior-year income tax returns with form 4562 and you should be able to get a lot of depreciation information from that.... Also since you have not talked to the old accountant I'm sure you know that there are usually two sides to a story... .....just my opinion...

[qbteachmt]

"There is no car. The 18,500 is equipment used in the business."

It's only 3 years prior to the one you are working on. It's not so far back that you cannot get Bank records. It's not so far back that this person should be able to remember what these few assets are. It's not as if you need to reconstruct Corporate start up with a warehouse, an office building, completely outfitted, including rolling stock.

If you build the info and the math still makes no sense, they likely did it wrong. If what you have is what the IRS got, that seems pretty easy to determine.

[rbynaker]

@TaxGuyBill wrote:

Get the Transcripts and/or copies of the tax returns from the IRS.  That way you can actually SEE the 4562 for all years.

---

TGB,

Are 4562s included in transcripts if they're not required to be filed?  You don't need to file the form every year, only if you have listed property or are adding new assets.  We know now that autos are not involved but even with autos on a Sch C you can report on C pg 2 if you have no other reason to file a 4562.

---

Another problem is that I don't think 200%DB exists for 15 year property.

---

I'll admit, I got lost in all of the rules in that time period.  They kept changing and I managed to survive with various de minimis / safe harbor elections and/or carefully navigating through the BAR rules to call things repairs (honestly I'm just calling it luck at this point).

OP,

I would try running though a mock return for 2017 and then roll the assets forward to get the depreciation each year until you have the beginning balance in accumulated depreciation for everything.  If you really like spreadsheets, you can use the percentage tables but you'll have to use the MQ tables for the percentages.  Looks like everything was placed in service in 4Q of 2017 so it shouldn't be too bad.

Rick

[TaxGuyBill]

You are right about the 4562s, so I should have clarified that if you see the entire filed tax return, you can see if a 4562 is on there, which would list any new assets for depreciation for that year.  That can help narrow down the depreciation.

[IRonMaN]

I just have to ask ------------------ is the prior preparer a lady from Hawaii? 😁