Discussion:Reconcile depre sched to PPE per balance sheet
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Discussion Forum Index --> Tax Questions --> Reconcile depre sched to PPE per balance sheet
| January 8, 2008 | |
| I'm just curious how many of you reconcile the tax depreciation schedule to the balance sheet when you prepare returns. I was taught to do it and still do for every return.
I now am now working on a return (re-doing 6/07) in which that was not done. And the really frustrating part is that the client had paid me to do a reconciliation for them for 6/05 and that reconciliation was given to the prior preparer. (That's part of the reason he's the "prior" preparer.) The reason the return and books did not agree is that significant amounts of fixed assets were not put on the return for depreciation. Now I'm going back and finding that not only are some assets not listed, but between 6/05 and 6/07, the preparer combined things like "phone system" and "bookshelves" and entered them on the return as "phone system." Ahhhh! | |
| 8 January 2008 | |
| I do so on all entity returns (corps, ptshps - those with balance sheets) and for Sch C clients who give me a QB backup to work with....it seems to be the only way to make sure all assets are picked up each year. I have been known to lump things together (not necessarily phone system & bookshelves tho...). I even have a few clients that I track book vs tax depreciation on their QB balance sheet. | |
| January 8, 2008 | |
| I've always puzzled when I get a prior return that doesn't match the books. What a nightmare. I'd rather not have a schedule at all than those that don't match! It's much easier to recreate one from returns if necessary, than try and figure out what some goof was thinking. Oh, and those are ALWAYS the ones where broomhandles are taken over 7 years, but not MACRS. Oh, no. SL! | |
| January 8, 2008 | |
| Thanks for making me smile, JR. In this case, client has losses carried forward for several years and preparer took 200% depre. I had advised SL. Maybe they wanted to see how big they could make the losses. | |
| January 10, 2008 | |
| This just gets more frustrating as I work through it. Prior preparer entered Sec. 179 on software placed in service in 2001. It wasn't allowed back then and it wasn't taken. Dates wrong for in-service. Yuck. I just have to plow through this knowing that next year all of the assets will actually agree with the books. | |
Phil Moody (talk|edits) said: | 10 January 2008 |
| You know why they dont balance: $$$$$$.
Prior preparer makes more if time is not spent balanceing such records. | |
| January 10, 2008 | |
| . . . assets deleted from schedule when fully depreciated. Dates changed to a more recent year because they hadn't been properly depreciated in past. Assets combined but not added up correctly.
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| January 10, 2008 | |
| "assets deleted from schedule when fully depreciated".
It is funny how often that is done. Who cares about depreciation recovery? It's in the client's best interest to make those issues go away. Heck, might as well delete the 5-year Sec 1231 Loss schedule while you are at it. You also sometimes see the prior preparer just group all of those fully depreciated assets into one monster asset called "Fully Depr Assets", because they were too lazy to do it right when they took over that client as a new client. | |
| January 10, 2008 | |
| Ahh, Paul, I'm not laughing. A different prior preparer DID group a bunch assets together. I'm trying to teach this client how to properly account for things, budget, look at/analyze the financial statements, and he doesn't even have an accurate list of the property/equipment the company owns!
Actually, I just re-read your post and I did chuckle. | |
Southparkcpa (talk|edits) said: | 11 January 2008 |
| In North Carolina, we have business personal property taxes. In 2004, the city of Charlotte hired an accounting firm to audit these returns. Based on that, in my office we now reconcile the FA schedule to the books and the property tax form. We charge a fee for this an in fact added about 8K in revenue for the service which adds very little time, adds quality to the closing process and in fact is a win /win for all. | |
| 11 January 2008 | |
| Ah the fun of reviewing other preparer's depreciation schedules. I once found a client who had many assets listed, but it didn't sound right. Found out the prior accountant believed you could form a new entity, contribute old fully-depreciated assets, and get brand new basis to start depreciating all over again. Client thought he was a wonderful tax adviser. Oops. | |
| 11 January 2008 | |
| I've got one client - where the bookkeeper knows about the Sec 179 expensing, opened up an account in the P & L section of the general ledger - called it Sec 179 Fixed Assets - and whenever a fixed asset is purchased posts the expense there rather than the balance sheet Fixed Assets section. | |
Taxstudent (talk|edits) said: | 11 January 2008 |
| I wish it were confined to fixed assets. I have no idea why so many preparers insist on using book basis to report an item on the return with a hard to analyze entries to compensate for the discrepancy. For example, the Schedule A shows beginning and ending inventory using the book basis instead of the tax basis (including UNICAP) with the other costs line reduced to compensate for the book-tax difference. Though it gets to the same point, this method only works if SALY is applied consistently, which is more difficult to do in this case. The problem is only exacerbated by the lack of good supporting detail on the schedules M-1 and M-3. To be honest, I've only seen two M-1s prepared with sufficient detail to make everything clear in this area. (This is a real problem. If the return does not show the inventory's tax basis, you're more likely to make a mistake, for example, in the gain calculation when you distribute it to a shareholder.) Generally, the smallest tax firms do the best work in this area, though it varies widely too. | |
| January 11, 2008 | |
| I have a dog named SALY :-)
We occasionally use SALLLLLY in the office, but those are the clients I need to fire. | |
