All Forum Posts by: Jason Heath

Thanks folks.  I went with DCN 107, as the descriptor in the instructions seemed closest to what I was trying to accomplish ... but I have forwarded to my CPA for review ... wish me luck!

Thanks Joseph, I having been reviewing that Rev Proc and I am filing the 3115.  Offhand, do you know whether DCN 107 is the right one for this requested change?

I am trying to file a Form 3115 to change accounting method on a rental house I sold in 2015 (I only took half the depreciation I was entitled to, and I would now like to claim the rest as a Section 481A adjustment on my Schedule E).  Does anyone know the proper DCN to use in this situation from the List of Automatic Changes?  Very confusing....

Thanks Steven.  I have since learned more about the topic, and also determined that it is more like a $3,800 swing, so I am definitely going to file the 3115 form.  But I am having trouble finding someone to actually do it for me.  The closest I have come so far is someone willing to review it if I do it, so I am trying to get up to speed on it, figure out the correct DCN and determine whether it is an automatic change, etc.  If you know of any CPA willing to do this, please let me know (I don't know whether CPAs are licensed per state, or nationally). 

Thanks!

Hi Katrina - I am learning that the correct way to do this is to file a Form 3115, Application for Change in Accounting Method.  (I have a lot to learn about this form!)  Then, when you file your taxes, you claim the unaccounted-for depreciation as an expense on your Schedule E, noting it as a "Section 481A adjustment".  The form is a real bear (it has already scared off one CPA ...), but I am going to give it a shot and have a different CPA review it.  Wish me luck!

Thanks to you both!  How long does it typically take for the IRS to "approve" your 3115?  Or does it just get accepted as a matter of course, and then they audit you later if they want to?  I am a little concerned about filing the 3115 at the same time as my taxes, getting a larger return, and then having them reject the 3115 .... ever seen that happen?

Hello folks:  Does anyone know whether you must still own a property in order to file Form 3115 changing accrual method?  Or, if you just recently disposed of the property, can you file the Form 3115 before recognizing the disposition of the property on your taxes?  Thanks!

Hi - I think I have found a solution for my unclaimed depreciation dilemma for rental property.  For those who have failed to claim the correct amount of depreciation during the time you owned a rental property, have you ever claimed a Section 481A Adjustment on your Schedule E at the time of sale?  For instance, say your allowable depreciation during the time you owned the asset was 20K, but you only claimed 10K during the time you owned the property.  When accounting for the disposition of the asset on your taxes, you claim the depreciation as 20K (the amount you should have, but did not originally take), and at the same time claim 10K as an expense on Schedule E, so that your overall losses on the property truly match the amount of depreciation being assessed against the property.  Does that sound reasonable?

Thanks Meagan, I will check out that article.  I thought I could only go back three years to amend a return, and since the returns I would need to amend are for 2005 to 2010, I would be out of luck.  I am talking about a $1,000 swing here, and figuring it would probably cost me that much to hire a CPA to deal with it, especially for filing forms, etc.  One question - does a 481A adjustment and accounting method change just count for three previous years, or can you go back to the beginning of owning the property?

When I look at the federal worksheets supporting the forms, it shows one form for depreciable property, and another for depreciable property as adjusted for AMT.  On the first one, it reflects the number I put in, of actual depreciation ($8830).  On the one adjusted for AMT, it shows the number of "allowable" depreciation, what I should have taken ($20K+)  Then, the AMT is added to the 1040 to raise my federal taxes and lower my refund.  That's what I mean when I say that there is no adjustment on my federal return whether I input $8830 or the $20K+ number.  The return basically ignores my $8830 number, and just automatically puts in the $20K+ number and adjusts it through application of the AMT.

But there is a difference for my state return.  If I put in the 8830 number, I get a higher state refund (reflecting the lower depreciation I really took).  If I put in the 20K number, I get a lower return (reflecting the higher depreciation I could have, but did not take).  Can anyone think of any reason why the AMT adjusted number would be used on the Fed return, but not taken over to the State return?  Does California not follow the Fed AMT rules?  California also has a depreciable property worksheet, and a "depreciable property as adjusted for AMT" worksheet, but the California one does not automatically put in the 20K number for previous depreciation, it is just blank.  Basically, does anyone know whether California (or any other state) follows the same rules as the Feds in recapturing "allowable" depreciation as opposed to actual depreciation taken?  Believe me, I know this is confusing, I appreciate anyone who is actually looking at it and taking a second to think about it!