HELP!!!

Because you have been including your land in the depreciation, it is not as simple as amending.

You have been taking an impermissible method and must change to a permissible method.

Amending returns will only correct depreciation errors that have occurred in the last three years. Errors that have occurred before that cannot be “caught up” on current or amended returns and will only be “caught up” when the asset is sold using a Form 3115 and Code 107 as discussed below.

Change in Accounting Method Form 3115:

Form 3115, Change in Accounting Method, is used to correct most other depreciation errors, including the omission of depreciation. If you forget to take depreciation on an asset, the IRS treats this as the adoption of an incorrect method of accounting, which may only be corrected by filing Form 3115. When changing methods of accounting from not taking depreciation (incorrect method) to taking depreciation (correct method) use Code 7 on Form 3115 if the asset is still in use, code 107 if disposed.

The IRS’s automatic consent procedures for taxpayers who have adopted an impermissible method of accounting for depreciation (or amortization) and have either claimed no allowable depreciation, less depreciation than allowable, or more depreciation than allowable is provided in the guidance at Rev. Proc. 2015-13 and 2018-31.

Generally, Form 3115 must be attached to the taxpayer’s tax return for the year of change by the original due date (including extensions). A copy must also be filed with the IRS no later than when the original is filed with the taxpayer’s return.

Taxpayers who qualify under the automatic procedure are permitted to change to a method of accounting under which the allowable amount of depreciation is claimed. The unclaimed depreciation from years prior to the year of change is taken into account as a net negative (taxpayer favorable) adjustment in the year of change, generally effective for tax years ending on or after December 31, 2001 and are deducted in full on the return for the year of change.

Changes that are considered to be a change in accounting method are:

• Changing from not taking depreciation to taking depreciation. (Because this is a change from an impermissible method to a permissible method use Code 7 on Form 3115)
• Changes in methods or conventions, (Because this is a change from 1 permitted method to another, use Code 8 or 200 if MACRS on Form 3115)
• Changes to or from a required life, (Because this is a change from 1 permitted method to another, use Code 8 on Form 3115)
• Correcting depreciation on leasehold improvements from using the incorrect life of the lease term to the correct life of the asset (generally 39 years). (Use Code 199 on Form 3115)