Depreciation

[WY1]

I purchased a rental house in 2013. Created an LLC in 2018 and put the house in it.  I have always prepared my taxes using Turbo Tax until last year when I hired a CPA because of the LLC.

Now I am trying to finish depreciating improvements on the house and I'm getting a message from Turbo Tax that I can't enter anything prior to 2018 because that's when the business was started. It is when the LLC was started, but I had the house for 5 years before that.

What do I do about this?

[Critter]

What tax form are you filing for the LLC ?   What form did the CPA use ?   What does the depreciation worksheet from the 2018 return look like ?   

[Carl]

My screen indicates you are using TurboTax Business. This would indicate to me that you are filing a 1065 Partnership return. (Partnerships and multi-member LLC's both file the same 1065 return.) It also indicates that there is more than one owner of the business. (You can't file a 1065 with only one business owner. Period.)

Therefore your start date of the business "MUST" be the first day the first rental asset was available for rent. It does not matter if it was years ago either.

The "BUSINESS" was started in 2013.

The "PARTNERSHIP" was started in 2018.

You also have the nightmare of ensuring that prior year's depreciation is allocated correctly, as all depreciation between 2013 and 2018 up to the month you transferred the rental from your personal tax return to the partnership, is 100% allocated to you personally, since you personally claimed it on your 1040 tax return.

All depreciation after the rental was transferred to the partnership in 2018 is split between you and any other partners of the business.

I have been informed that a fair number of CPAs do not do this allocation correctly for folks dealing with your exact situation. But I make no claims as to the accuracy of what I've been "informed of" either.

[WY1]

Form 1065 for both (last year and this year) and I can't find the depreciation worksheet for 2018. Yet. I'm going crazy with this and have to put it down for a while.

Before we formed the LLC, I had no difficulty doing the taxes, including the rental houses plus a small business and have used Turbo Tax for a long, long time. 

[WY1]

Thank you for your reply. Yes, it is a partnership, with my husband and I equal partners (50% each).

Reading your answer is making me think I can't do this on my own. I was hoping to eliminate the CPA. 

Also seriously thinking about dissolving the LLC, and go back to the days where I could do my own taxes (with 4 rental properties but I never had a problem!)

[Critter]

Look at the depreciation worksheet that the CPA did for 2018 ... those are the figures you need to enter on the 2019 return and none of the transferred assets from the personal Sch E should have a date earlier than 2018  ... if it does then you need to get the CPA to correct his error before you file the 2019 return.

[tagteam]

@WY1 You can change the placed-in-service date directly on the Federal Asset Entry Worksheet in Forms Mode.

Simply change the "Date placed in service" to the day and month in 2013. TurboTax Business does not handle this situation well in Step-by-Step Mode.

[Critter]

If you don't have the depreciation worksheet then shame on the CPA for failing to provide you one ... you may need to ask for it ... or you may be able to get the info you need from the form 4562.

[WY1]

Thanks for that advice, I will hunt for that tomorrow. So far haven't been able to find. I will go back to the CPA tomorrow if I have to. Last year he made errors on both the LLC return and our personal return and I had him do amendments on both. He works for a well-established company in our small town, I didn't think they'd keep him on. But he is still there for me to ask. I did ask for electronic copies - that was also an ordeal to get and they don't have worksheets. This was my first experience with a CPA!

[WY1]

Good to know - that may be really helpful.