I just discovered that, since 2005, I have claimed 100% of the depreciation instead of 50%.
I would highly recommend you seek professional help yesterday if not sooner. Especially if your state taxes personal income. Form what I read on numerous websites (including irs.gov) there is no definitive concensus I can find on how to handle this.
Some say you need to file IRS Form 3115-Chanage in accounting method. That form is used when you have used an impermissible method for depreciation or did not depreciate at all. But the issue I see there is that you have a mathematical calculation error - not an error caused by an impermissible method of depreciation.
Other's say you need to amend, but even numerous IRS sites say you can only amend 2 or 3 years back, with no mention of what to do when the issue exceeds 4 years.
There are many issues with amending back to 2005.
- If the amended return prior to 2018 will result in you getting a refund, that refund will not be paid because of the three year statute of limitations. However, if it results in you owing taxes, then you have to pay it, plus any interest, fines and late fees that may be imposed on the amount due. (Can get very costly, very quickly.)
- When it comes to the TurboTax program, they only support their software for the current tax filing year and 3 years back. So for the TurboTax program for 2017 and older, it's not possible to get the *required* corrections and updates to the software. This means the chance of your amended return being wrong are extremely high, if not 100% certain.
- The Turbotax 100% accuracy guarantee is only valid for the software they support. Since TTX only supports their software for the current tax year and 3 years back, you have no valid claim to errors in the program prior to 2018. In other words, you're on your own.
- When you amend a prior year tax return with the TTX software, the amended figures are not carried forward to the next years return for amending, and flat out can not be carried forward to the next year's return for amending. It is just not possible to import from the prior year when you are amending a return. You would have to know the correct values from the prior year's amended return and enter them manually into the tax return for the year you are amending.
- An amended tax return can not be e-filed. The IRS Says so. You have to print, sign and mail the return to the IRS.
Overall, I highly recommend/suggest/encourage you to seek professional help to get this fixed. I'm guessing based on no facts what-so-ever that you'll probably end up reducing your cost basis by the amount of excess depreciation taken. But it's not that simple with TurboTax, as changing the cost basis of an existing asset will completely skew the depreciation history and make your current and future depreciation wrong. So professional help is called for.
