Not reporting an expense, is there anything wrong with this?
Yes. The IRS says you are required to claim all business expenses. Now I did a quick perusal of IRS Pub 535, and can't seem to find where it says that. I may have seen it elsewhere in a "tax topic" document maybe.
How about for a depreciating business asset using a 5-year straight line method. Can you simply elect not to take a depreciation deduction for it in any given year?
That I know you can't do. Anything used in business for the production of income that has a useful life of more than 1 year, is required to be depreciated, or expensed if the asset qualifies. At best, what you can do is convert the asset to personal use and remove it from business use entirely. That will stop the depreciation on that asset. But, if it's an asset that is ordinary/necessary for your business, you can probably expect to be audited on it anywhere from 24 to 36 months after filing. Otherwise, you'd darn well better "not" be using it in the business for the period of time it's not classified as a business asset - and you "may" have to prove it if audited/questioned on it. Depending on the asset and it's classification, this method can have a pretty good chance of "raising flags" with the IRS. So I don't recommend it.
Keep in mind too, the IRS is hiring another 87,000 agents in addition to the 72,000 they already have. They're not doing that to go after the "rich" people.
