Home Page link  

Depreciation for the IRS

  
Groups | Search | About
User Password
Register Now! Lost Password?

Taxes General Forum - Tax professionals meeting place and answers to queries. (Moderated)

 Post an article  get this group's latest topics as an RSS feed add this group's latest topics to your My MSN content add this group's latest topics to your My Yahoo content  add this group's latest topics to your Google content  YahooMyWeb Yahoo!  Google Google  Windows Live Favorites Windows Live  del.icio.us del.icio.us  digg digg  Add to Netscape Netscape
Subject Author Date
Depreciation for the IRS Kevin 03-30-2007
Posted by Kevin on March 30, 2007, 3:37 am
Please log in for more thread options
 I apologize for asking what is probably a simple question,
but...

I understand the "accounting" concept of straight line
depreciation. My vehicle is used 100% in my business, it has
a useful life of 5 years and no salvage value so I take the
value multiply by business use percentage and divide by the
5 year useful life to get my depreciation amount for each of
the 5 years. At years end I make the necessary journal
entries to record said depreciation. books look good and I
have an accurate picture of what my assets are worth.

Now, my question is this, what the &*#! is the IRS talking
about on form 4562??? Half-year convention, depreciation
rate, "multiply the percentage rate by the property's
unrecovered basis (basis for depreciation (as defined in
column (c)) reduced by all prior years depreciation)?!?

I realize that at this point I'm very frustrated with the
tax codes so I'm probably not reading this correctly, or
reading to much into it - but it seems like it is way to
complicated for me to be doing it right! Am I missing
something. Why can't I simply enter 1/5 the value of the
asset - aka. the depreciation amount from my books - as the
depreciation amount on form 4562? Could someone please help
clarify how to "depreciate assets the IRS way"!

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Rich Carreiro on March 30, 2007, 10:46 pm
Please log in for more thread options
> I understand the "accounting" concept of straight line
> depreciation. My vehicle is used 100% in my business, it has
> a useful life of 5 years and no salvage value so I take the
> value multiply by business use percentage and divide by the
> 5 year useful life to get my depreciation amount for each of
> the 5 years. At years end I make the necessary journal
> entries to record said depreciation. books look good and I
> have an accurate picture of what my assets are worth.
>
> Now, my question is this, what the &*#! is the IRS talking
> about on form 4562??? Half-year convention, depreciation
> rate, "multiply the percentage rate by the property's
> unrecovered basis (basis for depreciation (as defined in
> column (c)) reduced by all prior years depreciation)?!?

Now you understand why businesses (legitimately) keep two
sets of books -- one for makes-economic-sense accounting
and one for income tax computation. The business lobby
has pushed over the years for the tax code to allow for
accelerated depreciation.

You should download or otherwise obtain a copy of IRS
Publication 946. You will use the tables in the back
of the publication. Rather than playing games with
"remaining basis", you simply find the table corresponding
to the class life of what you're depreciating, go to
the column for the month/quarter you put the asset in
service, and then each year multiply the original depreciable
cost of the item by the percentage listed in the table for
that year. Nice and simple.

--
Rich Carreiro rlcarr@animato.arlington.ma.us

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Kevin on April 4, 2007, 2:20 pm
Please log in for more thread options
> You should download or otherwise obtain a copy of IRS
> Publication 946. You will use the tables in the back
> of the publication. Rather than playing games with
> "remaining basis", you simply find the table corresponding
> to the class life of what you're depreciating, go to
> the column for the month/quarter you put the asset in
> service, and then each year multiply the original depreciable
> cost of the item by the percentage listed in the table for
> that year. Nice and simple.

Just what I needed, although I'm not sure which was more
disturbing, the fact that the IRS needs an entire
publication to explain how to report depreciation or that
the publication was 113 pages long! At any rate, thanks for
the response.

kevin

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by bono9763@yahoo.com on March 30, 2007, 10:46 pm
Please log in for more thread options

> I apologize for asking what is probably a simple question,
> but...
>
> I understand the "accounting" concept of straight line
> depreciation. My vehicle is used 100% in my business, it has
> a useful life of 5 years and no salvage value so I take the
> value multiply by business use percentage and divide by the
> 5 year useful life to get my depreciation amount for each of
> the 5 years. At years end I make the necessary journal
> entries to record said depreciation. books look good and I
> have an accurate picture of what my assets are worth.
>
> Now, my question is this, what the &*#! is the IRS talking
> about on form 4562??? Half-year convention, depreciation
> rate, "multiply the percentage rate by the property's
> unrecovered basis (basis for depreciation (as defined in
> column (c)) reduced by all prior years depreciation)?!?
>
> I realize that at this point I'm very frustrated with the
> tax codes so I'm probably not reading this correctly, or
> reading to much into it - but it seems like it is way to
> complicated for me to be doing it right! Am I missing
> something. Why can't I simply enter 1/5 the value of the
> asset - aka. the depreciation amount from my books - as the
> depreciation amount on form 4562? Could someone please help
> clarify how to "depreciate assets the IRS way"!

IRS uses a "Modified Accelerated Cost Recovery System"
(MACRS) to depreciate property. It assumes the property was
placed in service mid- year, and so you report depreciate of
5-year property over six tax years (one-half year for the
first and last years of service). It usually involves the
200% declining balance method. See IRS Pub. 946 for more
details.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Similar ThreadsPosted
Depreciation March 25, 2008, 9:43 pm
accelerated depreciation February 17, 2007, 4:58 am
Computer Depreciation March 7, 2007, 4:30 am
Depreciation Allowance March 10, 2007, 2:30 am
Schedule C Depreciation March 19, 2007, 11:12 am
Required Depreciation? ? ? April 9, 2007, 3:29 am
Unclaimed Depreciation April 9, 2007, 3:29 am
Depreciation Disagreement June 3, 2007, 10:29 pm
Depreciation Question March 8, 2008, 2:34 am
Depreciation of Herding Dog March 18, 2008, 5:32 pm

Contact Us | Privacy Policy
This site is not affiliated with Intuit - makers of Quickbooks and Quicken software
This site is not affiliated with Sage Software - makers of Peachtree accounting software
XML SitemapXML Sitemap