I think Turbo tax made an error on my 2016 tax form 4562 by depreciating the wrong value for my rental property for the first 8 months in service, what should I do?

[Carl]

Why specifically and explicitly do you think this?

You really need to confirm this, because the only way possible to "correctly" fix an error from more than three years back, is with professional help.  Remember, only the value of the structure gets depreciated over 27.5 years. Land is not depreciated.

[xqpmm15]

Turbo tax did the return so they need to check if it is correct or not.

I understand land is not depreciated.  The cost of the house, net of land, is 117,267, placed in service May 2016.  Using GDS and 27.5 year depreciation the tables show to use 2.273% .

This would equate to $2665.

Turbo tax calculated $1786.  They added to the equation the cost of the house to be 67% of the total value. 

That would be a double whammy  - the tables show the reduction by having the year 1 table.  There shouldn't be two reductions.  

As shown in Pub 547 pg 11, I believe this confirms my statements above; 

Example. You purchased a single family rental house for $185,000 and placed it in service on February 8. The sales contract showed that the building cost $160,000 and the land cost $25,000. Your basis for depreciation is its original cost, $160,000. This is the first year of service for your residential rental property and
you decide to use GDS which has a recovery period of 27.5 years. Using Table 2-2d, you find
that the percentage for property placed in service in February of Year 1 is 3.182%. That year's depreciation deduction is $5,091 ($160,000 x 0.03182).

Please let me know what you think.

[Megan D]

They made an obvious error!!! This was made on both my regular rental depreciation and AMT depreciation! The AMT pulled the Non-AMT depreciation for the AMT depreciation calculation. I don't know how they calculated the regular 2016 depreciation but it is lower than it should have been.

Accumulated Depreciation - In both Non-AMT and AMT cases the prior year depreciation (used to calculate accumulated depreciation) used what the depreciation expense should have been in calculating the accumulated depreciation.

Bottom line is I lost depreciation expense permanently due to TT calculating the wrong amount because the accumulated depreciation is higher than it should have been given the erroneously low depreciation expense for both Regular and AMT depreciation in 2016. 

I have it all documented. Does TT do anything for the tax payer to correct their errors?!?

[MichelleLO]

You can submit a claim under the TurboTax Accurate Calculation Guarantee by following the steps in the below TurboTax article. 

• What is the TurboTax 100% Accurate Calculation Guarantee?
• How do I submit a claim under the TurboTax 100% Accurate Calculation Guarantee or 100% Accurate, Exp...

[Carl]

It looks to me like you may have entered the wrong amount in the COST box back in 2016.

COST is the total cost including the land.

COST OF LAND is the amount of COST that is applied to the land.

The program (not you) will subtract COST OF LAND from COST to determine the amount to be depreciated.

What you did was enter the cost of the structure only in the cost box, in the amount of 117,267, and a land value of about 38,693. Subtracting land from the cost gives a structure value of 78,574. Multiply 78,574 by .02273 and you get 1,786.

Unfortunately, the error is on your part. Even more unfortunately, since this as been occurring for more than 2 consecutive years, a 3115 will need to be completed and filed to fix this. While that form is included in the program, it's not simple by any stretch and should not be attempted by those not well versed in how to fill it out. Professional help would be necessary.

Be aware I am not a TTX employee. I'm just another user just like you. But the above is what I was able to figure out may have happened here.

[tagteam]

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@Carl wrote:

....since this as been occurring for more than 2 consecutive years, a 3115 will need to be completed and filed to fix this. 

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Using an incorrect basis is generally considered to be a mathematical or posting error and not an impermissible method of accounting that can be rectified with Form 3115.