How to Map Depreciation to Lacerte Tax Software?

Posted by nish on September 3, 2008, 8:35 pm

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I have a question about how to map depreciation expense accounts in
Quickbooks to tax software.

In Quickbooks we maintain two separate expense accounts for depreciation:

Current Year Depreciation
Section 179 Allowance

We calculate the depreciation using a third party fixed asset application
that is much nicer and much more detailed than our tax software Lacerte.
We then post the depreciation as a single number into Quickbooks, and that
is the number we want to draw into the tax software.

When I go to look at the Tax Line Mapping for expense accounts in
Quickbooks, there is no depreciation line. I see something that is
tangential which is: "Schedule M-1: Depreciation per books". First, can
someone explain what that is and how tax software might use that? Is it
going to map correctly to tax software depreciation on form 4562, or is that
entry only going to be used for comparison purposes on M1 (i.e., comparing
book versus tax depreciation) against a depreciation number you are left to
develop independently inside the tax software.

It really looks like Quickbooks did not think about this carefully enough.
Clearly not everyone wants to list fix assets and do depreciation inside of
tax software.

An alternate way I see to do this is to map the depreciation accounts to
"Other Deductions" and then inside the tax software manually map the
depreciation accounts in the trial balance when mapping to an appropriate
account in the tax software. That seems awfully manual and would be prone
to errors in future years if the operator did not follow a strict procedure,
which we would need to create.

I am hoping to find an automatic method for import, and I'm holding out some
hope that others can explain the schedule M-1 mapping and if that is likely
to work here.

nish

Posted by Haskel LaPort on September 3, 2008, 10:53 pm

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>I have a question about how to map depreciation expense accounts in

>Quickbooks to tax software.

> In Quickbooks we maintain two separate expense accounts for depreciation:

> Current Year Depreciation

> Section 179 Allowance

> We calculate the depreciation using a third party fixed asset application

> that is much nicer and much more detailed than our tax software Lacerte.

> We then post the depreciation as a single number into Quickbooks, and that

> is the number we want to draw into the tax software.

> When I go to look at the Tax Line Mapping for expense accounts in

> Quickbooks, there is no depreciation line. I see something that is

> tangential which is: "Schedule M-1: Depreciation per books". First,

> can someone explain what that is and how tax software might use that?

> Is it going to map correctly to tax software depreciation on form 4562, or

> is that entry only going to be used for comparison purposes on M1 (i.e.,

> comparing book versus tax depreciation) against a depreciation number you

> are left to develop independently inside the tax software.

> It really looks like Quickbooks did not think about this carefully enough.

> Clearly not everyone wants to list fix assets and do depreciation inside

> of tax software.

> An alternate way I see to do this is to map the depreciation accounts to

> "Other Deductions" and then inside the tax software manually map the

> depreciation accounts in the trial balance when mapping to an appropriate

> account in the tax software. That seems awfully manual and would be

> prone to errors in future years if the operator did not follow a strict

> procedure, which we would need to create.

> I am hoping to find an automatic method for import, and I'm holding out

> some hope that others can explain the schedule M-1 mapping and if that is

> likely to work here.

There are times when certain general ledger accounts do not get linked to
the tax software, deprecation is one of them. Either the tax software
maintains the fixed assets and places the numbers on the forms, Lacerte is
certainly capable of doing so and most professionals using it take this
option. Another option is to maintain depreciation in another software
program that exports the required information to your tax software. Intuit's
Fixed Asset Manager software does this with Intuit's Proseries line of
software. FAM can be purchased stand alone and is also part of the
Accountant's version of QuickBooks. The last option is to manually enter the
numbers onto the tax software's screen forms.

Schechle M-1 can be used to reconcile the depreciation taken on the books of
the tax entity versus depreciation taken on the tax return. Often the two
amounts are quite different.

> nish