Improperly categorized depreciable assets

Forum|Forum|3 years ago
November 11, 2022
3 replies
34 views

I'm switching from an accountant to TurboTax this year and just realized my previous accountants (2 different people over the previous 4 years) miscategorized some assets. I have camera equipment and camera accessories that I both use and rent out. One accountant started depreciating my equipment as furniture/fixtures, which is 7 years so same as video equipment. Maybe no big deal. The other accountant started depreciating newer assets I purchased as machinery/equipment, which is a 5 year schedule and would change the math if I switched categories so obviously a bigger deal. Can I switch everything to the proper category or do I just continue each item as it was started, knowing that the category is wrong?

FYI - sole proprieter 1040 Sch C

Best answer by Mike9241

did your prior accountants fully depreciate the assets by taking either section 179 and/or bonus/special depreciation? this would have resulted in expensing (fully depreciating) the entire cost in the year they were put into service. if so, the wrong lives would not matter because there is nothing left to depreciate.

if they didn't you can not just change their lives. technically you would be required to file form 3115 to correct these errors. this is probably something that you would need a pro to do so it's done correctly. this would be the proper thing to do. however. if not a lot of $$$'s are involved I would think twice about going that route and just leave things as they are.

Mike9241

Answer

Level 15

Mike9241

dirt_mangurtAuthor

Level 2

They all have life left but only one more year for the incorrect 5 year assets. The accountant took 50% of the value the first year as 179/bonus/special. The biggest current depreciation for the upcoming return is $1,159 under the 5 year schedule. The rest are all under $300. Sounds like continuing as is will be the way to go and shouldn't ruffle any IRS feathers. Thanks!