Depreciation for small buainess

Forum|Forum|3 years ago
February 7, 2023
2 replies
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In 2014 my wife remodeled her very small beauty shop. This included new desk ceiling tiles blinds floor etc. Turbo taxes taken care of depreciation each year.

However last year I lost a hard drive on my computer and lost 2 years of ax returns. I have Printed copies just not the file on my PC Turbo tax looks for so... I am on my own for filling this out thos year....if I even need to.

I know nothing about the depreciation but I can tell you looking at last year's filing , the depreciable basis was 3855..This is what her remodel cost in 2014. The prior depreciation was up to 3683 and last year's current depreciation was 172. If it matters it seems the method was 200DB/HY.

My concern is I have no clue what to type in here for this year ....if anything... It seems like the original amount we spent was 3855 and if i read this right 3683 has been depreciated as of last year.

Do I even need to enter anything? Has this all been depreciated? What should I do? Thanks everyone.

TurboTax Home & Biz Windows

JosephS1

On a net income basis for this year there is nothing you need do as there will be no depreciation taken. However, in the "Asset" section of the business you should consider entering the information pertaining to each asset that is/was part of the business. This may be needed in case in the future there are any sales complications should your wife sell and/or retire. While it may sound unfair, when an asset is sold that utilized accelerated depreciation, of which 200DB is one method, as opposed to straight line depreciation (equal amounts each year), there may be what is called "recapture" on the excess depreciation. It does not appear to be a problem in this case but it always is a benefit to having everything listed and accounted for.

@confusedrf

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Carl11_2

Employee

You have the 2021 printouts. So this will be fairly simple. Just a lot of typing on your part, is all.

In the 2021 printout you have two form 4562's that business. They both print in landscape format. One is titled "Depreciation and Amortization Report" and is mostly likely the only one you'll need. The other is titled "Alternative Minimum Tax Depreciation" and you'll need that only if the program asks you for AMT amounts.

Refer to the first 4562 when manually entering all of your assets again. You will enter things exactly as they appear on the 2021 form 4562. There are some things that won't be the same, and I cover those now.

When entering the assets, you will of course use the original in service date as shown on the 2021 form 4562. The program (not you) will figure as best it can, the prior depreciation already taken. When it displays that prior depreciation, you can change it if necessary. But to confirm it's correct:

On the 2021 form 4562 add together the amounts in the "Prior year deprec" column and the "current year deprec" column. That total will be the total amount of prior year's depreciation already taken prior to your 2022 tax year. If what the program figures is not spot on, it will be within a few bucks, and that's fine. However, you can change it to match exactly if desired. I suggest you make it match exactly.

When done, print out the form 4562 (the landscape one) to confirm certain things match up. Columns that need to match up are:

Asset Description: Keep this identical, as it makes things easier if you ever have to refer to depreciation history, or if you get audited.

Code: Must match. If it doesn't, you selected the wrong MACRS asset type.

Date in Service: Must match. No explaining necessary.

Cost (Net of Land): Must match

Land: Must match. Will be blank for non-real estate assets.

Bus Use %: musth match, assuming the business use percentage is the same every year.

Section 179: Will be an amount in this column only on those assets you took a SEC179 deduction on. That deduction would have been taken the tax year the asset was placed in service. If there is an amount there, they must match.

Special Depreciation Allowance: Will be an amount in this column only on those assets you took the SDA deduction on. That deduction would have been taken the tax year the asset was placed in service. If there is an amount there, they must match.

Depreciable Basis: Must match. No exceptions. Period.

Life: Must match. No exceptions. Period.

Method/Convention: Must match. No exceptions. Period.

Prior Depreciation: Will not match. If the asset is still being depreciated, the amount here will be higher on the 2022 form 4562. If the asset was fully depreciated in 2021 or earlier, the amount will be the same as on the 2021 form 4562. Under no circumstances can the 2022 amount be lower than the 2021 amount shown in this column.

Current Depreciation: For assets not yet fully depreciated, this amount will be the same on the 2022 form 4562 (or within a few bucks) as it is on the 2021 from 4562. Depending on a few factors, it "could" be lower (such as if this is the last year of depreciation taken to fully depreciate the asset.) But it will never be higher.

confusedrfAuthor

Well I entered a big long post on all the issues I was having keying in the data. However I don't see my post here so maybe that's a good thing. I deleted everything and started over and now I have all my information and it look similar to last years except the prior depreciations are all off. Current depreciation is always 0 which is probably right the lifetime said 7 years and it's been 7 years. But the prior depreciation column does not match last years sheet. The difference between my original cost and prior depreciation is now about $600 where is last yesr it was bout a $172. Can I somehow update the prior depreciation column.

Carl11_2

Employee

But the prior depreciation column does not match last years sheet.

I'm confident its just a data entry error on your part. Easy to do when someone (such as myself) doesn't provide enough clarity about how to do this. I suspect I may have lacked clarity somewhere. Let's double-check something here.

For both years, confirm you're looking at the sheet titled "Depreciation and Amortization Report" and not the other sheet titled "Alternative Minimum Tax Depreciation Report"

On last year's sheet, the 2021 form 4562, if you add together the amounts in the "prior year's deprec" column and the "current year deprec" column, that total should match the 2022 form 4562 "prior year's deprec" column. If it does, then you're good to go and all is right. If this doesn't match, then give me the numbers in those two columns from both the 2021 and the 2022 form 4562's so we can figure it out.