Sch C Depreciation - Can I just stop?

[sun244]

Friends,

I am doing taxes Using TT Small Business Version for 2021. My prior return done by CPA includes Depreciation expenses (PC, Phone, furniture) in Sch C for which I do not have any details. Can I just drop these in 2021? If I just drop them from 2021 without any mention, Will this be flagged (the fact that I had Depreciation last year and they do not appear this year) and will IRS query?

Thanks

[ColeenD3 · Accepted solution]

No, you can't just stop. Your pc and phone have a 5-year useful life. The furniture has 7. If you know the year it was placed in service, you can calculate it yourself.

[sun244]

Thanks for the reply. 

I bought a new smart phone and I read it can be expensed.  I see you have written the phone has 5 year life, Do you see any issues with expensing?

Sun

[AliciaP1]

No, there won't be an issue if you choose to deduct the asset with the Section 179 election to expense the asset.  If you have to dispose of it prior to the 5-year life, you may have some recapture to report at that point.

@sun244

[sun244]

Both my laptop and phone is broken and I want to write it off. When I entered the depreciation in TT, I did mention that these are disposed or something like that. Will TT take this response and do the right reporting in all forms? Please can you let me know what you mean by recapture? 

Thanks

[ColeenD3]

Yes, show that you disposed of the item, either as destroyed or converted to personal use it doesn't show as a sale. If you took accelerated depreciation, which is meant to cover the asset for its useful life and you disposed of the asset before the life was over, you must pay tax on the depreciation that you took up front that you weren't entitled to.

[sun244]

Thank You. Since I am not an expert, pardon my questions.

1. I see the CPA had used 200DB as Asset Depreciation Method. When I filled the Depreciation forms, I did indicate to TT that I disposed the item after filling all the details. Will TT, automatically calculate the additional Tax and do the calculations? 

2. I have completed my Tax Return. Can you please let me know which form and line number to see that additional tax has been added because of my decision to dispose my assets early?

Appreciate your help

[ColeenD3]

Since your accountant did not use accelerated depreciation, you do not have to recapture any amounts. You can safely dispose of them without additional tax if you say they were destroyed.