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Lev
Lev, Tax Advisor
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Experience:  Taxes, Immigration, Labor Relations
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I have an S Corp. My previous accountant under deducted on

Resolved Question:

I have an S Corp. My previous accountant under deducted on one fixed asset, my vehicle. It was noted as placed in service on 10/12/2001, on the 2006 tax return, but was never depreciated before the 2006 return. It was marked as a 5 year and to use the 200/DB/HY method of depreciation. Can the depreciation on this be caught up on the 2007 tax return, or does the 2006 need to be amended?   Also, since the asset was noted as placed in service in 2001, and thus never depreciated until 2006, is it too late to take the full depreciation for this vehicle? In other words, can the depreciation start as if it were placed in service in 2006, in order to get the full vehicle depreciation over time?
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.

If you place the vehicle in service in 2001 - and decided not to deduct actual travel expenses, but to deduct standard mileage instead - that was your choice - and standard mileage covers all actual expenses including depreciation.

 

So far honestly speaking your depreciation was deducted - not directly but indirectly as part of mileage deductions. You may not start depreciation from scratch.

 

Also what so-called "caught up" depreciation may be used only in the first year the property put in service. That include Special Depreciation Allowance

and Section 179 Deduction.

 

Customer: replied 5 years ago.
The new accountant put the vehicle on form 4562 in 2006 and as listed property under line 26. This was the first year it was on a tax return. The accountant also claimed actual vehicle expenses, like gas.
Expert:  Lev replied 5 years ago.

So you put vehicle in service in 2001 and claimed standard mileage - that is OK.

In 2002 you decided that you would get better refund if claim an actual travel expenses instead of the standard mileage method - that is also OK.

The part of actual expenses is a depreciation - that was reported on the form 4562.

 

But you did not put the vehicle in service in 2006 - and may not deduct depreciation as if you just started to use it in business.

 

If you purchase a new vehicle - you may decide in the first year if it is more beneficial to deduct actual expenses (including depreciation) or to use standard mileage rate.

 

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22615
Experience: Taxes, Immigration, Labor Relations
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