Incorrect Asset Cost

[geekgirldany]

Client, S-Corp, truck cost basis was reported incorrectly back in 2010. The cost should have been $2,000 more than originally reported. I just discovered the error when the client paid off the truck.

The truck was Section 179 expense, approximately $30,000.

How can I correct this error other than amending that year?

I am probably going the wrong direction here... but could Form 3115 be used since it was Sec 179 in one year and there is $2000 depreciation that should have been included?
Just trying to think of another way.

[taxea]

You don't have to 179 the full amount of the asset. I would amend 2010 with 2K as depreciation for the asset. It may or may not change the bottom line. If it doesn't then I wouldn't file the amended return unless you need to. I would then bring the depreciation forward by amending the subsequent years with the same filing or not filing idea. This way you have the correct figures for 2013 return. It would be very quick to update/amend the returns for just one item. The amended returns can be held and filed if needed later.

[TaxGuyBill]

Is the 2010 tax return still within the 3 year statute of limitations for a refund?

If so, I would amend 2010 and add the rest to Section 179 (assuming there is income to allow it). However, you would need to amend both the corporate return and the personal return.


I think Form 3115 without first amending 2010 is questionable. Correcting a "mathematical or posting error" is not a change in method of accounting. This might be viewed as a mathematical or posting error.

http://www.law.cornell.edu/cfr/text/26/1.446-1#e

http://www.irs.gov/irb/2011-04_IRB/ar08.html#d0e2804

If you amend 2010 to start depreciating the $2000, that would mean you would need to amend EVERY year, both the corporate return and personal return or amend the 2010 returns and then file Form 3115 to catch up for the other years.

[geekgirldany]

Thank you both for posting. Looks like it is too late to amend 2010 for any refund to come back. I was a year off thinking of they still get it.

I will follow the advice given and amend each year to see the difference. File if needed.

[taxea]

yes it is too late for a refund on 2010 but you will have to file it anyway if you file the other years. You can't add the amount to 179. You had to do it that year.