Form 4562 is being left off my return

[weaslebub]

My son bought a new vehicle last year that he uses for business, and at the same time he traded in his old business vehicle. Form 4562 shows both these vehicles but it just says to keep for my records. The disposition of the old vehicle doesn't show up and there are are no depreciation numbers filled in (probably because I always take the standard mileage deduction), but the percent business use is visible. I rechecked all the info I entered in TT H&B for these vehicles and it all looks accurate. This form wasn't included in last year's return, which is technically correct since there were no new assets added. However, form 4562 was included in his 2017 return, even though he didn't add any new assets that year either.

Did tax reform change what circumstances form 4562 is required? Is there a way to override the software and include it when I e-file?

I didn't suspect there could be a software issue until I got past the error checking portion and it threw me into a loop. It kept repeating the same three screens no matter what I did. The error check, audit meter, and accuracy guaranteed screens just cycle over and over. Just concerns me that there could be other issues too.

Which leads me to my next question...

Does it make sense that my tax liability would have gone up significantly after tax reform changes went into effect for 2018, even though my income and deductions changed very little? I'm on disability and my deductions are always very high due to medical expenses, to the point that I can't remember the last time I owed anything. After completing my 2018 taxes last year after the new tax code changes went into effect, my tax liability was over $4,000, even though my circumstances were nearly identical to prior years. Did tax reform negatively impact those who have a large amount of deductions? Have there been others reporting they were negatively impacted by the 2018 tax reform? I'm still working on 2019 taxes so I don't have another year post tax reform to compare it to yet.

[Anonymous · Accepted solution]

Did tax reform change what circumstances form 4562 is required? Is there a way to override the software and include it when I e-file?

tax reform did not change the requirements for form 4562. since a new asset was put into service in 2019 a 4562 should be in the return.  no you can't override to include it. might be possible to print it but then you would have to mail in the return.

this would seem to indicate something is wrong with the entry of the hew auto and maybe even the disposition of the old one. we can't see the return so can't say what is causing the issues. 

as to your returns, it may make sense that in 2018 you owed $4,000.  the medical expense deduction is limited to 7.5% of adjusted gross income.  the deduction for taxes is limited starting in 2018 to $10,000 ( a big change for many taxpayers who have a high state income tax and or real estate taxes). starting in 2018, mortgage interest may be limited (but mortgages would have to be over $750,000 may even $1,000,000).  charity up to 60% of adjusted gross income.   most other deductions have been eliminated.

you get the larger of your itemized or standard deduction. for 2018 it depends on filing status and age.

2018 standard deduction 12000 if single + 1300 if over 65

or 24000 if married + 1300 if either spouse over 65 or 2600 if both are.  

look at line 8 of 1040 and also see if schedule a was included. 

basically, the same rules for 2019 except the standard deduction goes up a few hundred.

you may want to compare the 2017 return to 2018. the line numbers are completely different but perhaps this will give you an idea of whether or not the $4,000 seems right 

[Carl]

probably because I always take the standard mileage deduction)

That's exactly why the 4562 is not sent to the IRS. While you may have the vehicle listed on the 4562, that form will show $0 depreciation for that vehicle, because the depreciation is already include in the per-mile deduction.

The disposition of the old vehicle doesn't show up

If you correctly reported the disposition of the old vehicle, then most likely it doesn't show up where you expect it to. Did you report the vehicle as traded in for the new one? Or did you report it as it's own separate sale of the vehicle asset?

FYI, to see the amount of each year's per-mile deduction back to 2003 that is depreciation, see https://bradfordtaxinstitute.com/Free_Resources/IRS-Mileage-Rates.xml.aspx and scroll a bit more than halfway down the page for the table.

[weaslebub]

Thanks.

So are you saying if I take the standard mileage deduction then I don't have to manually enter details about the asset on the car and truck worksheet? And I don't need a 4562 on the new used car we bought?

I reported the disposition on the old car, but whether I did it correctly is a different story. How can I tell if I did? The old car was a clunker given to my son from a family member. I claimed the mileage deduction for him the years he used it, and when the car was on it's last leg he had it towed to the dealer he was using and they took it off his hands. The dealership didn't buy it from him, they basically took it off his hands and did who knows what with it. The car was 17 years old anyway so I didn't care. We later discovered the dealer had to fudge the numbers on the purchase order in order to justify our negotiated price. They wrote that they gave a $1000 credit for the old car, but they never agreed to that in person. Plus, if you took that $1000 credit away and added it back onto the car's price, the car's total price would be higher than their original asking price. While we were negotiating, I couldn't even get them to give us $50 for the trade in because they said it was too old, too broken, and too much trouble. But they did agree to dispose of it if we bought a car from them. I just reported it was sold for 0. 

If I need to tie it to the $1000 credit, I'm going to need some guidance. Over the years, my son made money in two businesses with this car and we made a Sch C for both businesses and deducted the appropriate mileage for each one. If I have to report the disposal of the old car for both Sch C's, how would I handle the $1000 credit? If I enter the same car info on both business returns, it will show a $1000 profit two times. Would I split the cost between both or enter the full amount on one and zero on the other?

Since the very beginning, I've never entered any details about vehicles outside of step by step interview screens. I have also never used anything other than the standard mileage deduction. We've always had used cars, never new. Given this history, can you tell me if there's anything I'd need to open the form and enter manually on either of the worksheets for the old car and the new used car? When I was trying everything I could think of to force form 4562 to be included in the return for the new vehicle, I came across a bunch of questions on the worksheet about topics I don't understand. I read the instructions and interpreted them as best I could, but I really just think they confused me more. Questions about MACRS, depreciation, AMT, and others that I've never had to deal with before. Even the worksheet for the old car had errors on it I had to fix manually, all relating to depreciation. If all I need to do when taking the standard mileage is to walk through the screens and enter the numbers and dates they ask for, then I will delete everything and start over. The old car will be harder because data was transferred from past years.

[Carl]

So are you saying if I take the standard mileage deduction then I don't have to manually enter details about the asset on the car and truck worksheet? And I don't need a 4562 on the new used car we bought?

Nope, not saying that at all. The disposition of the old car will still be on either the 4797 or SCH D, and possibly both. But since there is no change on the 4562 mathematically, there's no need for it. The IRS doesn't want it. A car listed on the 4562 showing zero depreciation (as it should) and then later removed from the 4562 does not change the total depreciation on that 4562. Since there's no change in the total depreciation taken, including it is a moot point. Send it, and the IRS will just delete it or shred it.

What I would do with a car that has no trade in value (a 17 year old car really doesn't, unless you sell it for scrap) is just show it as "sold or otherwise disposed of". Then on the "special handling required" screen select YES to indicate that I threw it away in the garbage and be done with it. This would alleviate the need for depreciation recapture.

Then show the acquisition of the new car. If the dealer gave me anything for the old car, (which in your case they did not - the dealer just fudged the numbers for *THEM*, not you) then I would just add that amount to the purchase price of the new car.

Take what you actually paid out of your pocket in cold, hard cash. (this includes any loan amount from a lender as shown on the loan documents) and compare it to the bottom line price on your receipt from the dealer. If the receipt amount is higher, then the difference was your trade-in value which you'll just add to the cash you paid. (cash includes amounts borrowed from a lender in this case)

In other words, the dealer's receipt plus any fudged trade-in value is what you paid for the car.(assuming that receipt does not include the trade-in value of the car. It very well could.)

Overall, you're making this more difficult for yourself than it really is. That old car is a 17 year old piece of junk. Treat it accordingly and give it no more attention that you would the garbage can in your kitchen. 🙂