Vehicle depreciation

[dktax]

New client this year. Last year preparer took $25,000 Section 179 on truck >6000 lbs. He set it up as 7 year asset. Shouldn't it be 5 year? Not sure how to continue depreciation.

[ATSMAN]

New client this year. Last year preparer took $25,000 Section 179 on truck >6000 lbs. He set it up as 7 year asset. Shouldn't it be 5 year? Not sure how to continue depreciation.

I would do a 1040X instead of a 3115 because the amendment period is still open for a 2016 return. Fix the depreciation on 2016 and move on.

[dktax]

No amendment

That was my first thought but client does not want to amend.

[TaxGuyBill]

Yes, it should be 5 years. The correct method is to fix things would be to amend.

Otherwise, just report it correctly on the current year tax return, taking into account the depreciation that SHOULD have been claimed in 2016 (based on 5 years). So if the taxpayer does not choose to amend, they will just 'miss out' on claiming the depreciation, but that 'missed' depreciation will still effectively cost them money when the vehicle is sold.

[ATSMAN]

That was my first thought but client does not want to amend.

Why?

If my client refused to follow my advice to fix a tax matter error that may come back to bite me if I let it continue, I would disengage!

[Burke]

Why?

If my client refused to follow my advice to fix a tax matter error that may come back to bite me if I let it continue, I would disengage!

Usually because they do not want to pay for the additional return. Perhaps the increase in depr is not worth it. I wouldn't worry about it if he won't. Just do it correctly on the one you are preparing. As TaxGuyBill said, it will all come out in the end.