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140 Ez Form

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140 Ez Form

140 ez form Publication 51 - Additional Material Prev  Up  Next   Home   More Online Publications
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Withholding Compliance Questions & Answers

Q1: In the past, as an employer, I was required to submit all Forms W-4 that claimed complete exemption from withholding (when $200 or more in weekly wages were regularly expected) or claimed more than 10 allowances. What Forms W-4 do I now have to submit to the IRS?

A1: Employers are no longer required to routinely submit Forms W-4 to the IRS.  However, in certain circumstances, the IRS may direct you to submit copies of Forms W-4 for certain employees in order to ensure that the employees have adequate withholding. You are now required to submit the Forms W-4 to IRS only if directed to do so in a written notice or pursuant to specified criteria set forth in future published guidance.

 


Q2: If an employer no longer has to submit Forms W-4 claiming complete exemption from withholding or claiming more than 10 allowances, how does the IRS determine adequate withholding?

A2: The IRS is making more effective use of information contained in its records along with information reported on Form W-2 wage statements to ensure that employees have enough federal income tax withheld. 
 


Q3: If the IRS determines that an employee does not have enough federal income tax withheld, what will an employer be asked to do?

A3: If the IRS determines that an employee does not have enough withholding, we will notify you to increase the amount of withholding tax by issuing a “lock-in” letter that specifies the maximum number of withholding allowances permitted for the employee. You will also receive a copy for the employee that identifies the maximum number of withholding exemptions permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate number of withholding exemptions. If the employee still works for you, you must furnish the employee copy to the employee. If the employee no longer works for you, NO ACTION IS REQUIRED AT THIS TIME. However if the employee should return to work within twelve (12) months, you should begin withholding income tax from the employee’s wages based on the withholding rate stated in this letter.The employee will be given a period of time before the lock-in rate is effective to submit for approval to the IRS a new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease federal income tax withholding. The employee must send the Form W-4 and statement directly to the IRS office designated on the lock-in letter. You must withhold tax in accordance with the lock-in letter as of the date specified in the lock-in letter, unless otherwise notified by the IRS. You will be required to take this action no sooner than 45 calendar days after the date of the lock-in letter. Once a lock-in rate is effective, an employer can not decrease withholding unless approved by the IRS.

 


Q4: As an employer, after I lock in withholding on an employee based on a lock-in letter from the IRS, what do I do if I receive a revised Form W-4 from the employee?

A4: After the receipt of a lock-in letter, you must disregard any Form W-4 that decreases the amount of withholding. The employee must submit for approval to the IRS any new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease federal income tax withholding. The employee should send the Form W-4 and statement directly to the address on the lock-in letter. The IRS will notify you to withhold at a specific rate if the employee’s request is approved. However, if, at any time, the employee furnishes a Form W-4 that claims a number of withholding allowances less than the maximum number specified in the lock-in letter, the employer must increase withholding by withholding tax based on that Form W-4.

 


Q5: As an employer who has received a modification letter (letter 2808C) from the WHC program, do I wait for another 60 days to change the marital status and/or number of allowances per the modification letter?

A5: No, the modifications to the marital status and/or number of allowances become effective immediately upon receipt of the letter 2808C.

 


Q6: I have been directed to lock in an employee’s withholding. What happens if I do not lock in the employee’s withholding as directed?

A6: Those employers who do not follow the IRS lock-in instructions will be liable for paying the additional amount of tax that should have been withheld. 

 


Q7: Our employees can submit or change their Forms W-4 on line. How can I prevent them from changing their Forms W-4 after they have been locked-in by the IRS?

A7: You will need to block employees who have been locked-in from using an on line Form W-4 system to decrease their withholding.

 


Q8:  What should I do if an employee submits a valid Form W-4 that appears to be claiming an incorrect withholding amount?

A8: You should withhold federal income tax based on the allowances claimed on the Form W-4.  But, you should advise the employee that the IRS may review withholding to ensure it is adequate, and that the IRS may direct you, as the employer, to withhold income tax for the employee at a certain rate if the review indicates the employee’s withholding is inadequate. Once this occurs the employee will not be allowed to decrease their withholding unless approved by the IRS.

 


Q9: What do I do if an employee hands me a substitute Form W-4 developed by the employee?

A9:  Employers may refuse to accept a substitute form developed by an employee and the employee submitting such a form will be treated as failing to furnish a Form W-4.  In such case, you should inform the employee that you will not accept this form and offer the employee an opportunity to complete an official Form W-4 or a substitute Form W-4 developed by you. Until the employee furnishes a new Form W-4, the employer must withhold from the employee as from a single person claiming no allowances; if, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4.  As an employer, a substitute withholding exemption certificate developed by you can be used in lieu of the official Form W-4, if you provide all the tables, instructions, and worksheets contained in the Form W-4 in effect at that time to the employee.  

 


Q10: What do I do if an employee hands me an official IRS Form W-4 that is clearly altered?

A10: Any alteration of a Form W-4 (e.g. crossed out penalties of perjury statement above the signature) will cause the Form W-4 to be invalid. If an employer receives an invalid Form W-4, the employee will be treated as failing to furnish a Form W-4; the employer must inform the employee that the Form W-4 is invalid, and must request another Form W-4 from the employee. Until the employee furnishes a new Form W-4, the employer must withhold from the employee as from a single person claiming no allowances. If, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4.

 


Q11: I heard my employer no longer has to routinely submit Forms W-4 to the IRS.  How will this affect me as an employee?

A11: There is no change in the requirement that employees have adequate income tax withholding. The withholding calculator found on www.irs.gov is available to help employees determine the proper amount of federal income tax withholding. Another useful resource, Publication 505, “Tax Withholding and Estimated Taxes" is available on the IRS Web site or can be obtained by calling 1-800-TAX-FORM (829-3676).  Individuals who do not have sufficient income tax withholding are subject to penalties. The IRS will be making more effective use of information contained in its records along with information reported on Form W-2 wage statements to ensure that employees have enough federal income tax withheld. 

 


Q12: As an employee, what happens if the IRS determines that I do not have adequate withholding?

A12: The IRS may direct your employer to withhold federal income tax at an increased rate to ensure you have adequate withholding by issuing a lock-in letter. At that point, your employer must disregard any Form W-4 that decreases the amount of withholding. You will receive a copy of the lock-in letter. You will be given a period of time before the lock-in rate is put in effect to submit for approval to the IRS a new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease your federal income tax withholding. You should send the Form W-4 and statement directly to the address on the lock-in letter. Once a lock-in letter is issued, you will not be allowed to decrease your withholding unless approved by the IRS.

 


Q13: What if I don’t want to submit a Form W-4 to my employer?

A13: Your employer is required to withhold income tax from your wages as if you are single with zero allowances if you do not submit a Form W-4.

 

 


Q14: How can you be released from the Withholding Compliance Program?

A14: You must continue to file returns and pay your taxes due. If you timely meet all your filing and payment obligations for three consecutive years, you can request that we release you from the Withholding Compliance Program.

Page Last Reviewed or Updated: 20-Mar-2014

The 140 Ez Form

140 ez form 1. 140 ez form   Overview of Depreciation Table of Contents Introduction Useful Items - You may want to see: What Property Can Be Depreciated?Property You Own Property Used in Your Business or Income-Producing Activity Property Having a Determinable Useful Life Property Lasting More Than One Year What Property Cannot Be Depreciated?Land Excepted Property When Does Depreciation Begin and End?Placed in Service Idle Property Cost or Other Basis Fully Recovered Retired From Service What Method Can You Use To Depreciate Your Property?Property You Placed in Service Before 1987 Property Owned or Used in 1986 Intangible Property Corporate or Partnership Property Acquired in a Nontaxable Transfer Election To Exclude Property From MACRS What Is the Basis of Your Depreciable Property?Cost as Basis Other Basis Adjusted Basis How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions?Filing an Amended Return Changing Your Accounting Method Introduction Depreciation is an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property. 140 ez form It is an allowance for the wear and tear, deterioration, or obsolescence of the property. 140 ez form This chapter discusses the general rules for depreciating property and answers the following questions. 140 ez form What property can be depreciated? What property cannot be depreciated? When does depreciation begin and end? What method can you use to depreciate your property? What is the basis of your depreciable property? How do you treat repairs and improvements? Do you have to file Form 4562? How do you correct depreciation deductions? Useful Items - You may want to see: Publication 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch C (Form 1040) Profit or Loss From Business Sch C-EZ (Form 1040) Net Profit From Business 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. 140 ez form What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. 140 ez form You also can depreciate certain intangible property, such as patents, copyrights, and computer software. 140 ez form To be depreciable, the property must meet all the following requirements. 140 ez form It must be property you own. 140 ez form It must be used in your business or income-producing activity. 140 ez form It must have a determinable useful life. 140 ez form It must be expected to last more than one year. 140 ez form The following discussions provide information about these requirements. 140 ez form Property You Own To claim depreciation, you usually must be the owner of the property. 140 ez form You are considered as owning property even if it is subject to a debt. 140 ez form Example 1. 140 ez form You made a down payment to purchase rental property and assumed the previous owner's mortgage. 140 ez form You own the property and you can depreciate it. 140 ez form Example 2. 140 ez form You bought a new van that you will use only for your courier business. 140 ez form You will be making payments on the van over the next 5 years. 140 ez form You own the van and you can depreciate it. 140 ez form Leased property. 140 ez form   You can depreciate leased property only if you retain the incidents of ownership in the property (explained below). 140 ez form This means you bear the burden of exhaustion of the capital investment in the property. 140 ez form Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. 140 ez form You can, however, depreciate any capital improvements you make to the property. 140 ez form See How Do You Treat Repairs and Improvements later in this chapter and Additions and Improvements under Which Recovery Period Applies in chapter 4. 140 ez form   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. 140 ez form However, if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased, you cannot depreciate the cost of the property. 140 ez form Incidents of ownership. 140 ez form   Incidents of ownership in property include the following. 140 ez form The legal title to the property. 140 ez form The legal obligation to pay for the property. 140 ez form The responsibility to pay maintenance and operating expenses. 140 ez form The duty to pay any taxes on the property. 140 ez form The risk of loss if the property is destroyed, condemned, or diminished in value through obsolescence or exhaustion. 140 ez form Life tenant. 140 ez form   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. 140 ez form However, see Certain term interests in property under Excepted Property, later. 140 ez form Cooperative apartments. 140 ez form   If you are a tenant-stockholder in a cooperative housing corporation and use your cooperative apartment in your business or for the production of income, you can depreciate your stock in the corporation, even though the corporation owns the apartment. 140 ez form   Figure your depreciation deduction as follows. 140 ez form Figure the depreciation for all the depreciable real property owned by the corporation in which you have a proprietary lease or right of tenancy. 140 ez form If you bought your cooperative stock after its first offering, figure the depreciable basis of this property as follows. 140 ez form Multiply your cost per share by the total number of outstanding shares, including any shares held by the corporation. 140 ez form Add to the amount figured in (a) any mortgage debt on the property on the date you bought the stock. 140 ez form Subtract from the amount figured in (b) any mortgage debt that is not for the depreciable real property, such as the part for the land. 140 ez form Subtract from the amount figured in (1) any depreciation for space owned by the corporation that can be rented but cannot be lived in by tenant-stockholders. 140 ez form Divide the number of your shares of stock by the total number of outstanding shares, including any shares held by the corporation. 140 ez form Multiply the result of (2) by the percentage you figured in (3). 140 ez form This is your depreciation on the stock. 140 ez form   Your depreciation deduction for the year cannot be more than the part of your adjusted basis in the stock of the corporation that is allocable to your business or income-producing property. 140 ez form You must also reduce your depreciation deduction if only a portion of the property is used in a business or for the production of income. 140 ez form Example. 140 ez form You figure your share of the cooperative housing corporation's depreciation to be $30,000. 140 ez form Your adjusted basis in the stock of the corporation is $50,000. 140 ez form You use one half of your apartment solely for business purposes. 140 ez form Your depreciation deduction for the stock for the year cannot be more than $25,000 (½ of $50,000). 140 ez form Change to business use. 140 ez form   If you change your cooperative apartment to business use, figure your allowable depreciation as explained earlier. 140 ez form The basis of all the depreciable real property owned by the cooperative housing corporation is the smaller of the following amounts. 140 ez form The fair market value of the property on the date you change your apartment to business use. 140 ez form This is considered to be the same as the corporation's adjusted basis minus straight line depreciation, unless this value is unrealistic. 140 ez form The corporation's adjusted basis in the property on that date. 140 ez form Do not subtract depreciation when figuring the corporation's adjusted basis. 140 ez form   If you bought the stock after its first offering, the corporation's adjusted basis in the property is the amount figured in (1), above. 140 ez form The fair market value of the property is considered to be the same as the corporation's adjusted basis figured in this way minus straight line depreciation, unless the value is unrealistic. 140 ez form   For a discussion of fair market value and adjusted basis, see Publication 551. 140 ez form Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. 140 ez form If you use property to produce income (investment use), the income must be taxable. 140 ez form You cannot depreciate property that you use solely for personal activities. 140 ez form Partial business or investment use. 140 ez form   If you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the business or investment use. 140 ez form For example, you cannot deduct depreciation on a car used only for commuting, personal shopping trips, family vacations, driving children to and from school, or similar activities. 140 ez form    You must keep records showing the business, investment, and personal use of your property. 140 ez form For more information on the records you must keep for listed property, such as a car, see What Records Must Be Kept in chapter 5. 140 ez form    Although you can combine business and investment use of property when figuring depreciation deductions, do not treat investment use as qualified business use when determining whether the business-use requirement for listed property is met. 140 ez form For information about qualified business use of listed property, see What Is the Business-Use Requirement in chapter 5. 140 ez form Office in the home. 140 ez form   If you use part of your home as an office, you may be able to deduct depreciation on that part based on its business use. 140 ez form For information about depreciating your home office, see Publication 587. 140 ez form Inventory. 140 ez form   You cannot depreciate inventory because it is not held for use in your business. 140 ez form Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. 140 ez form   If you are a rent-to-own dealer, you may be able to treat certain property held in your business as depreciable property rather than as inventory. 140 ez form See Rent-to-own dealer under Which Property Class Applies Under GDS in chapter 4. 140 ez form   In some cases, it is not clear whether property is held for sale (inventory) or for use in your business. 140 ez form If it is unclear, examine carefully all the facts in the operation of the particular business. 140 ez form The following example shows how a careful examination of the facts in two similar situations results in different conclusions. 140 ez form Example. 140 ez form Maple Corporation is in the business of leasing cars. 140 ez form At the end of their useful lives, when the cars are no longer profitable to lease, Maple sells them. 140 ez form Maple does not have a showroom, used car lot, or individuals to sell the cars. 140 ez form Instead, it sells them through wholesalers or by similar arrangements in which a dealer's profit is not intended or considered. 140 ez form Maple can depreciate the leased cars because the cars are not held primarily for sale to customers in the ordinary course of business, but are leased. 140 ez form If Maple buys cars at wholesale prices, leases them for a short time, and then sells them at retail prices or in sales in which a dealer's profit is intended, the cars are treated as inventory and are not depreciable property. 140 ez form In this situation, the cars are held primarily for sale to customers in the ordinary course of business. 140 ez form Containers. 140 ez form   Generally, containers for the products you sell are part of inventory and you cannot depreciate them. 140 ez form However, you can depreciate containers used to ship your products if they have a life longer than one year and meet the following requirements. 140 ez form They qualify as property used in your business. 140 ez form Title to the containers does not pass to the buyer. 140 ez form   To determine if these requirements are met, consider the following questions. 140 ez form Does your sales contract, sales invoice, or other type of order acknowledgment indicate whether you have retained title? Does your invoice treat the containers as separate items? Do any of your records state your basis in the containers? Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. 140 ez form This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. 140 ez form Property Lasting More Than One Year To be depreciable, property must have a useful life that extends substantially beyond the year you place it in service. 140 ez form Example. 140 ez form You maintain a library for use in your profession. 140 ez form You can depreciate it. 140 ez form However, if you buy technical books, journals, or information services for use in your business that have a useful life of one year or less, you cannot depreciate them. 140 ez form Instead, you deduct their cost as a business expense. 140 ez form What Property Cannot Be Depreciated? Certain property cannot be depreciated. 140 ez form This includes land and certain excepted property. 140 ez form Land You cannot depreciate the cost of land because land does not wear out, become obsolete, or get used up. 140 ez form The cost of land generally includes the cost of clearing, grading, planting, and landscaping. 140 ez form Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. 140 ez form These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. 140 ez form Example. 140 ez form You constructed a new building for use in your business and paid for grading, clearing, seeding, and planting bushes and trees. 140 ez form Some of the bushes and trees were planted right next to the building, while others were planted around the outer border of the lot. 140 ez form If you replace the building, you would have to destroy the bushes and trees right next to it. 140 ez form These bushes and trees are closely associated with the building, so they have a determinable useful life. 140 ez form Therefore, you can depreciate them. 140 ez form Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. 140 ez form Excepted Property Even if the requirements explained in the preceding discussions are met, you cannot depreciate the following property. 140 ez form Property placed in service and disposed of in the same year. 140 ez form Determining when property is placed in service is explained later. 140 ez form Equipment used to build capital improvements. 140 ez form You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. 140 ez form See Uniform Capitalization Rules in Publication 551. 140 ez form Section 197 intangibles. 140 ez form You must amortize these costs. 140 ez form Section 197 intangibles are discussed in detail in Chapter 8 of Publication 535. 140 ez form Intangible property, such as certain computer software, that is not section 197 intangible property, can be depreciated if it meets certain requirements. 140 ez form See Intangible Property , later. 140 ez form Certain term interests. 140 ez form Certain term interests in property. 140 ez form   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. 140 ez form A term interest in property means a life interest in property, an interest in property for a term of years, or an income interest in a trust. 140 ez form Related persons. 140 ez form   For a description of related persons, see Related Persons, later. 140 ez form For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. 140 ez form Basis adjustments. 140 ez form   If you would be allowed a depreciation deduction for a term interest in property except that the holder of the remainder interest is related to you, you generally must reduce your basis in the term interest by any depreciation or amortization not allowed. 140 ez form   If you hold the remainder interest, you generally must increase your basis in that interest by the depreciation not allowed to the term interest holder. 140 ez form However, do not increase your basis for depreciation not allowed for periods during which either of the following situations applies. 140 ez form The term interest is held by an organization exempt from tax. 140 ez form The term interest is held by a nonresident alien individual or foreign corporation, and the income from the term interest is not effectively connected with the conduct of a trade or business in the United States. 140 ez form Exceptions. 140 ez form   The above rules do not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. 140 ez form They also do not apply to the holder of dividend rights that were separated from any stripped preferred stock if the rights were purchased after April 30, 1993, or to a person whose basis in the stock is determined by reference to the basis in the hands of the purchaser. 140 ez form When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. 140 ez form You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. 140 ez form Placed in Service You place property in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. 140 ez form Even if you are not using the property, it is in service when it is ready and available for its specific use. 140 ez form Example 1. 140 ez form Donald Steep bought a machine for his business. 140 ez form The machine was delivered last year. 140 ez form However, it was not installed and operational until this year. 140 ez form It is considered placed in service this year. 140 ez form If the machine had been ready and available for use when it was delivered, it would be considered placed in service last year even if it was not actually used until this year. 140 ez form Example 2. 140 ez form On April 6, Sue Thorn bought a house to use as residential rental property. 140 ez form She made several repairs and had it ready for rent on July 5. 140 ez form At that time, she began to advertise it for rent in the local newspaper. 140 ez form The house is considered placed in service in July when it was ready and available for rent. 140 ez form She can begin to depreciate it in July. 140 ez form Example 3. 140 ez form James Elm is a building contractor who specializes in constructing office buildings. 140 ez form He bought a truck last year that had to be modified to lift materials to second-story levels. 140 ez form The installation of the lifting equipment was completed and James accepted delivery of the modified truck on January 10 of this year. 140 ez form The truck was placed in service on January 10, the date it was ready and available to perform the function for which it was bought. 140 ez form Conversion to business use. 140 ez form   If you place property in service in a personal activity, you cannot claim depreciation. 140 ez form However, if you change the property's use to use in a business or income-producing activity, then you can begin to depreciate it at the time of the change. 140 ez form You place the property in service in the business or income-producing activity on the date of the change. 140 ez form Example. 140 ez form You bought a home and used it as your personal home several years before you converted it to rental property. 140 ez form Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. 140 ez form You can begin to claim depreciation in the year you converted it to rental property because its use changed to an income-producing use at that time. 140 ez form Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle (not in use). 140 ez form For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. 140 ez form Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. 140 ez form You recover your basis when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. 140 ez form See What Is the Basis of Your Depreciable Property , later. 140 ez form Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. 140 ez form You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. 140 ez form You sell or exchange the property. 140 ez form You convert the property to personal use. 140 ez form You abandon the property. 140 ez form You transfer the property to a supplies or scrap account. 140 ez form The property is destroyed. 140 ez form If you included the property in a general asset account, see How Do You Use General Asset Accounts in chapter 4 for the rules that apply when you dispose of that property. 140 ez form What Method Can You Use To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most property. 140 ez form MACRS is discussed in chapter 4. 140 ez form You cannot use MACRS to depreciate the following property. 140 ez form Property you placed in service before 1987. 140 ez form Certain property owned or used in 1986. 140 ez form Intangible property. 140 ez form Films, video tapes, and recordings. 140 ez form Certain corporate or partnership property acquired in a nontaxable transfer. 140 ez form Property you elected to exclude from MACRS. 140 ez form The following discussions describe the property listed above and explain what depreciation method should be used. 140 ez form Property You Placed in Service Before 1987 You cannot use MACRS for property you placed in service before 1987 (except property you placed in service after July 31, 1986, if MACRS was elected). 140 ez form Property placed in service before 1987 must be depreciated under the methods discussed in Publication 534. 140 ez form For a discussion of when property is placed in service, see When Does Depreciation Begin and End , earlier. 140 ez form Use of real property changed. 140 ez form   You generally must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. 140 ez form Improvements made after 1986. 140 ez form   You must treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. 140 ez form Therefore, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. 140 ez form For more information about improvements, see How Do You Treat Repairs and Improvements , later and Additions and Improvements under Which Recovery Period Applies in chapter 4. 140 ez form Property Owned or Used in 1986 You may not be able to use MACRS for property you acquired and placed in service after 1986 if any of the situations described below apply. 140 ez form If you cannot use MACRS, the property must be depreciated under the methods discussed in Publication 534. 140 ez form For the following discussions, do not treat property as owned before you placed it in service. 140 ez form If you owned property in 1986 but did not place it in service until 1987, you do not treat it as owned in 1986. 140 ez form Personal property. 140 ez form   You cannot use MACRS for personal property (section 1245 property) in any of the following situations. 140 ez form You or someone related to you owned or used the property in 1986. 140 ez form You acquired the property from a person who owned it in 1986 and as part of the transaction the user of the property did not change. 140 ez form You lease the property to a person (or someone related to this person) who owned or used the property in 1986. 140 ez form You acquired the property in a transaction in which: The user of the property did not change, and The property was not MACRS property in the hands of the person from whom you acquired it because of (2) or (3) above. 140 ez form Real property. 140 ez form   You generally cannot use MACRS for real property (section 1250 property) in any of the following situations. 140 ez form You or someone related to you owned the property in 1986. 140 ez form You lease the property to a person who owned the property in 1986 (or someone related to that person). 140 ez form You acquired the property in a like-kind exchange, involuntary conversion, or repossession of property you or someone related to you owned in 1986. 140 ez form MACRS applies only to that part of your basis in the acquired property that represents cash paid or unlike property given up. 140 ez form It does not apply to the carried-over part of the basis. 140 ez form Exceptions. 140 ez form   The rules above do not apply to the following. 140 ez form Residential rental property or nonresidential real property. 140 ez form Any property if, in the first tax year it is placed in service, the deduction under the Accelerated Cost Recovery System (ACRS) is more than the deduction under MACRS using the half-year convention. 140 ez form For information on how to figure depreciation under ACRS, see Publication 534. 140 ez form Property that was MACRS property in the hands of the person from whom you acquired it because of (2) above. 140 ez form Related persons. 140 ez form   For this purpose, the following are related persons. 140 ez form An individual and a member of his or her family, including only a spouse, child, parent, brother, sister, half-brother, half-sister, ancestor, and lineal descendant. 140 ez form A corporation and an individual who directly or indirectly owns more than 10% of the value of the outstanding stock of that corporation. 140 ez form Two corporations that are members of the same controlled group. 140 ez form A trust fiduciary and a corporation if more than 10% of the value of the outstanding stock is directly or indirectly owned by or for the trust or grantor of the trust. 140 ez form The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. 140 ez form The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. 140 ez form A tax-exempt educational or charitable organization and any person (or, if that person is an individual, a member of that person's family) who directly or indirectly controls the organization. 140 ez form Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 10% of the value of the outstanding stock of each corporation. 140 ez form A corporation and a partnership if the same persons own both of the following. 140 ez form More than 10% of the value of the outstanding stock of the corporation. 140 ez form More than 10% of the capital or profits interest in the partnership. 140 ez form The executor and beneficiary of any estate. 140 ez form A partnership and a person who directly or indirectly owns more than 10% of the capital or profits interest in the partnership. 140 ez form Two partnerships, if the same persons directly or indirectly own more than 10% of the capital or profits interest in each. 140 ez form The related person and a person who is engaged in trades or businesses under common control. 140 ez form See section 52(a) and 52(b) of the Internal Revenue Code. 140 ez form When to determine relationship. 140 ez form   You must determine whether you are related to another person at the time you acquire the property. 140 ez form   A partnership acquiring property from a terminating partnership must determine whether it is related to the terminating partnership immediately before the event causing the termination. 140 ez form For this rule, a terminating partnership is one that sells or exchanges, within 12 months, 50% or more of its total interest in partnership capital or profits. 140 ez form Constructive ownership of stock or partnership interest. 140 ez form   To determine whether a person directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership, apply the following rules. 140 ez form Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 140 ez form However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more of the value of the stock of the corporation. 140 ez form An individual is considered to own the stock or partnership interest directly or indirectly owned by or for the individual's family. 140 ez form An individual who owns, except by applying rule (2), any stock in a corporation is considered to own the stock directly or indirectly owned by or for the individual's partner. 140 ez form For purposes of rules (1), (2), or (3), stock or a partnership interest considered to be owned by a person under rule (1) is treated as actually owned by that person. 140 ez form However, stock or a partnership interest considered to be owned by an individual under rule (2) or (3) is not treated as owned by that individual for reapplying either rule (2) or (3) to make another person considered to be the owner of the same stock or partnership interest. 140 ez form Intangible Property Generally, if you can depreciate intangible property, you usually use the straight line method of depreciation. 140 ez form However, you can choose to depreciate certain intangible property under the income forecast method (discussed later). 140 ez form You cannot depreciate intangible property that is a section 197 intangible or that otherwise does not meet all the requirements discussed earlier under What Property Can Be Depreciated. 140 ez form Straight Line Method This method lets you deduct the same amount of depreciation each year over the useful life of the property. 140 ez form To figure your deduction, first determine the adjusted basis, salvage value, and estimated useful life of your property. 140 ez form Subtract the salvage value, if any, from the adjusted basis. 140 ez form The balance is the total depreciation you can take over the useful life of the property. 140 ez form Divide the balance by the number of years in the useful life. 140 ez form This gives you your yearly depreciation deduction. 140 ez form Unless there is a big change in adjusted basis or useful life, this amount will stay the same throughout the time you depreciate the property. 140 ez form If, in the first year, you use the property for less than a full year, you must prorate your depreciation deduction for the number of months in use. 140 ez form Example. 140 ez form In April, Frank bought a patent for $5,100 that is not a section 197 intangible. 140 ez form He depreciates the patent under the straight line method, using a 17-year useful life and no salvage value. 140 ez form He divides the $5,100 basis by 17 years to get his $300 yearly depreciation deduction. 140 ez form He only used the patent for 9 months during the first year, so he multiplies $300 by 9/12 to get his deduction of $225 for the first year. 140 ez form Next year, Frank can deduct $300 for the full year. 140 ez form Patents and copyrights. 140 ez form   If you can depreciate the cost of a patent or copyright, use the straight line method over the useful life. 140 ez form The useful life of a patent or copyright is the lesser of the life granted to it by the government or the remaining life when you acquire it. 140 ez form However, if the patent or copyright becomes valueless before the end of its useful life, you can deduct in that year any of its remaining cost or other basis. 140 ez form Computer software. 140 ez form   Computer software is generally a section 197 intangible and cannot be depreciated if you acquired it in connection with the acquisition of assets constituting a business or a substantial part of a business. 140 ez form   However, computer software is not a section 197 intangible and can be depreciated, even if acquired in connection with the acquisition of a business, if it meets all of the following tests. 140 ez form It is readily available for purchase by the general public. 140 ez form It is subject to a nonexclusive license. 140 ez form It has not been substantially modified. 140 ez form   If the software meets the tests above, it may also qualify for the section 179 deduction and the special depreciation allowance, discussed later. 140 ez form If you can depreciate the cost of computer software, use the straight line method over a useful life of 36 months. 140 ez form    Tax-exempt use property subject to a lease. 140 ez form   The useful life of computer software leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), cannot be less than 125% of the lease term. 140 ez form Certain created intangibles. 140 ez form   You can amortize certain intangibles created on or after December 31, 2003, over a 15-year period using the straight line method and no salvage value, even though they have a useful life that cannot be estimated with reasonable accuracy. 140 ez form For example, amounts paid to acquire memberships or privileges of indefinite duration, such as a trade association membership, are eligible costs. 140 ez form   The following are not eligible. 140 ez form Any intangible asset acquired from another person. 140 ez form Created financial interests. 140 ez form Any intangible asset that has a useful life that can be estimated with reasonable accuracy. 140 ez form Any intangible asset that has an amortization period or limited useful life that is specifically prescribed or prohibited by the Code, regulations, or other published IRS guidance. 140 ez form Any amount paid to facilitate an acquisition of a trade or business, a change in the capital structure of a business entity, and certain other transactions. 140 ez form   You must also increase the 15-year safe harbor amortization period to a 25-year period for certain intangibles related to benefits arising from the provision, production, or improvement of real property. 140 ez form For this purpose, real property includes property that will remain attached to the real property for an indefinite period of time, such as roads, bridges, tunnels, pavements, and pollution control facilities. 140 ez form Income Forecast Method You can choose to use the income forecast method instead of the straight line method to depreciate the following depreciable intangibles. 140 ez form Motion picture films or video tapes. 140 ez form Sound recordings. 140 ez form Copyrights. 140 ez form Books. 140 ez form Patents. 140 ez form Under the income forecast method, each year's depreciation deduction is equal to the cost of the property, multiplied by a fraction. 140 ez form The numerator of the fraction is the current year's net income from the property, and the denominator is the total income anticipated from the property through the end of the 10th taxable year following the taxable year the property is placed in service. 140 ez form For more information, see section 167(g) of the Internal Revenue Code. 140 ez form Films, video tapes, and recordings. 140 ez form   You cannot use MACRS for motion picture films, video tapes, and sound recordings. 140 ez form For this purpose, sound recordings are discs, tapes, or other phonorecordings resulting from the fixation of a series of sounds. 140 ez form You can depreciate this property using either the straight line method or the income forecast method. 140 ez form Participations and residuals. 140 ez form   You can include participations and residuals in the adjusted basis of the property for purposes of computing your depreciation deduction under the income forecast method. 140 ez form The participations and residuals must relate to income to be derived from the property before the end of the 10th taxable year after the property is placed in service. 140 ez form For this purpose, participations and residuals are defined as costs which by contract vary with the amount of income earned in connection with the property. 140 ez form   Instead of including these amounts in the adjusted basis of the property, you can deduct the costs in the taxable year that they are paid. 140 ez form Videocassettes. 140 ez form   If you are in the business of renting videocassettes, you can depreciate only those videocassettes bought for rental. 140 ez form If the videocassette has a useful life of one year or less, you can currently deduct the cost as a business expense. 140 ez form Corporate or Partnership Property Acquired in a Nontaxable Transfer MACRS does not apply to property used before 1987 and transferred after 1986 to a corporation or partnership (except property the transferor placed in service after July 31, 1986, if MACRS was elected) to the extent its basis is carried over from the property's adjusted basis in the transferor's hands. 140 ez form You must continue to use the same depreciation method as the transferor and figure depreciation as if the transfer had not occurred. 140 ez form However, if MACRS would otherwise apply, you can use it to depreciate the part of the property's basis that exceeds the carried-over basis. 140 ez form The nontaxable transfers covered by this rule include the following. 140 ez form A distribution in complete liquidation of a subsidiary. 140 ez form A transfer to a corporation controlled by the transferor. 140 ez form An exchange of property solely for corporate stock or securities in a reorganization. 140 ez form A contribution of property to a partnership in exchange for a partnership interest. 140 ez form A partnership distribution of property to a partner. 140 ez form Election To Exclude Property From MACRS If you can properly depreciate any property under a method not based on a term of years, such as the unit-of-production method, you can elect to exclude that property from MACRS. 140 ez form You make the election by reporting your depreciation for the property on line 15 in Part II of Form 4562 and attaching a statement as described in the instructions for Form 4562. 140 ez form You must make this election by the return due date (including extensions) for the tax year you place your property in service. 140 ez form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within six months of the due date of the return (excluding extensions). 140 ez form Attach the election to the amended return and write “Filed pursuant to section 301. 140 ez form 9100-2” on the election statement. 140 ez form File the amended return at the same address you filed the original return. 140 ez form Use of standard mileage rate. 140 ez form   If you use the standard mileage rate to figure your tax deduction for your business automobile, you are treated as having made an election to exclude the automobile from MACRS. 140 ez form See Publication 463 for a discussion of the standard mileage rate. 140 ez form What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. 140 ez form To determine basis, you need to know the cost or other basis of your property. 140 ez form Cost as Basis The basis of property you buy is its cost plus amounts you paid for items such as sales tax (see Exception , below), freight charges, and installation and testing fees. 140 ez form The cost includes the amount you pay in cash, debt obligations, other property, or services. 140 ez form Exception. 140 ez form   You can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). 140 ez form If you make that choice, you cannot include those sales taxes as part of your cost basis. 140 ez form Assumed debt. 140 ez form   If you buy property and assume (or buy subject to) an existing mortgage or other debt on the property, your basis includes the amount you pay for the property plus the amount of the assumed debt. 140 ez form Example. 140 ez form You make a $20,000 down payment on property and assume the seller's mortgage of $120,000. 140 ez form Your total cost is $140,000, the cash you paid plus the mortgage you assumed. 140 ez form Settlement costs. 140 ez form   The basis of real property also includes certain fees and charges you pay in addition to the purchase price. 140 ez form These generally are shown on your settlement statement and include the following. 140 ez form Legal and recording fees. 140 ez form Abstract fees. 140 ez form Survey charges. 140 ez form Owner's title insurance. 140 ez form Amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. 140 ez form   For fees and charges you cannot include in the basis of property, see Real Property in Publication 551. 140 ez form Property you construct or build. 140 ez form   If you construct, build, or otherwise produce property for use in your business, you may have to use the uniform capitalization rules to determine the basis of your property. 140 ez form For information about the uniform capitalization rules, see Publication 551 and the regulations under section 263A of the Internal Revenue Code. 140 ez form Other Basis Other basis usually refers to basis that is determined by the way you received the property. 140 ez form For example, your basis is other than cost if you acquired the property in exchange for other property, as payment for services you performed, as a gift, or as an inheritance. 140 ez form If you acquired property in this or some other way, see Publication 551 to determine your basis. 140 ez form Property changed from personal use. 140 ez form   If you held property for personal use and later use it in your business or income-producing activity, your depreciable basis is the lesser of the following. 140 ez form The fair market value (FMV) of the property on the date of the change in use. 140 ez form Your original cost or other basis adjusted as follows. 140 ez form Increased by the cost of any permanent improvements or additions and other costs that must be added to basis. 140 ez form Decreased by any deductions you claimed for casualty and theft losses and other items that reduced your basis. 140 ez form Example. 140 ez form Several years ago, Nia paid $160,000 to have her home built on a lot that cost her $25,000. 140 ez form Before changing the property to rental use last year, she paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house. 140 ez form Land is not depreciable, so she includes only the cost of the house when figuring the basis for depreciation. 140 ez form Nia's adjusted basis in the house when she changed its use was $178,000 ($160,000 + $20,000 − $2,000). 140 ez form On the same date, her property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. 140 ez form The basis for depreciation on the house is the FMV on the date of change ($165,000), because it is less than her adjusted basis ($178,000). 140 ez form Property acquired in a nontaxable transaction. 140 ez form   Generally, if you receive property in a nontaxable exchange, the basis of the property you receive is the same as the adjusted basis of the property you gave up. 140 ez form Special rules apply in determining the basis and figuring the MACRS depreciation deduction and special depreciation allowance for property acquired in a like-kind exchange or involuntary conversion. 140 ez form See Like-kind exchanges and involuntary conversions. 140 ez form under How Much Can You Deduct? in chapter 3 and Figuring the Deduction for Property Acquired in a Nontaxable Exchange in chapter 4. 140 ez form   There are also special rules for determining the basis of MACRS property involved in a like-kind exchange or involuntary conversion when the property is contained in a general asset account. 140 ez form See How Do You Use General Asset Accounts in chapter 4. 140 ez form Adjusted Basis To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. 140 ez form These events could include the following. 140 ez form Installing utility lines. 140 ez form Paying legal fees for perfecting the title. 140 ez form Settling zoning issues. 140 ez form Receiving rebates. 140 ez form Incurring a casualty or theft loss. 140 ez form For a discussion of adjustments to the basis of your property, see Adjusted Basis in Publication 551. 140 ez form If you depreciate your property under MACRS, you also may have to reduce your basis by certain deductions and credits with respect to the property. 140 ez form For more information, see What Is the Basis for Depreciation in chapter 4. 140 ez form . 140 ez form Basis adjustment for depreciation allowed or allowable. 140 ez form   You must reduce the basis of property by the depreciation allowed or allowable, whichever is greater. 140 ez form Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). 140 ez form Depreciation allowable is depreciation you are entitled to deduct. 140 ez form   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. 140 ez form   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). 140 ez form How Do You Treat Repairs and Improvements? If you improve depreciable property, you must treat the improvement as separate depreciable property. 140 ez form Improvement means an addition to or partial replacement of property that adds to its value, appreciably lengthens the time you can use it, or adapts it to a different use. 140 ez form You generally deduct the cost of repairing business property in the same way as any other business expense. 140 ez form However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. 140 ez form Example. 140 ez form You repair a small section on one corner of the roof of a rental house. 140 ez form You deduct the cost of the repair as a rental expense. 140 ez form However, if you completely replace the roof, the new roof is an improvement because it increases the value and lengthens the life of the property. 140 ez form You depreciate the cost of the new roof. 140 ez form Improvements to rented property. 140 ez form   You can depreciate permanent improvements you make to business property you rent from someone else. 140 ez form Do You Have To File Form 4562? Use Form 4562 to figure your deduction for depreciation and amortization. 140 ez form Attach Form 4562 to your tax return for the current tax year if you are claiming any of the following items. 140 ez form A section 179 deduction for the current year or a section 179 carryover from a prior year. 140 ez form See chapter 2 for information on the section 179 deduction. 140 ez form Depreciation for property placed in service during the current year. 140 ez form Depreciation on any vehicle or other listed property, regardless of when it was placed in service. 140 ez form See chapter 5 for information on listed property. 140 ez form A deduction for any vehicle if the deduction is reported on a form other than Schedule C (Form 1040) or Schedule C-EZ (Form 1040). 140 ez form Amortization of costs if the current year is the first year of the amortization period. 140 ez form Depreciation or amortization on any asset on a corporate income tax return (other than Form 1120S, U. 140 ez form S. 140 ez form Income Tax Return for an S Corporation) regardless of when it was placed in service. 140 ez form You must submit a separate Form 4562 for each business or activity on your return for which a Form 4562 is required. 140 ez form Table 1-1 presents an overview of the purpose of the various parts of Form 4562. 140 ez form Employee. 140 ez form   Do not use Form 4562 if you are an employee and you deduct job-related vehicle expenses using either actual expenses (including depreciation) or the standard mileage rate. 140 ez form Instead, use either Form 2106 or Form 2106-EZ. 140 ez form Use Form 2106-EZ if you are claiming the standard mileage rate and you are not reimbursed by your employer for any expenses. 140 ez form How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. 140 ez form See Filing an Amended Return , next. 140 ez form If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. 140 ez form See Changing Your Accounting Method , later. 140 ez form Filing an Amended Return You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. 140 ez form You claimed the incorrect amount because of a mathematical error made in any year. 140 ez form You claimed the incorrect amount because of a posting error made in any year. 140 ez form You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. 140 ez form You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. 140 ez form Adoption of accounting method defined. 140 ez form   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return, or by using the same impermissible method of determining depreciation in two or more consecutively filed tax returns. 140 ez form   For an exception to this 2-year rule, see Revenue Procedure 2011-14 on page 330 of the Internal Revenue Bulletin 2011-4, available at www. 140 ez form irs. 140 ez form gov/pub/irs-irbs/irb11-04. 140 ez form pdf. 140 ez form (Note. 140 ez form Revenue Procedure 2011-14 is clarified and modified by Revenue Procedure 2012-20. 140 ez form For more information, see Revenue Procedure 2012-20 on page 700 of the Internal Revenue Bulletin 2012-14, available at www. 140 ez form irs. 140 ez form gov/pub/irs-irbs/irb12-14. 140 ez form pdf. 140 ez form )   For a safe harbor method of accounting to treat rotable spare parts as depreciable assets and procedures to obtain automatic consent to change to the safe harbor method of accounting, see Revenue Procedure 2007-48 on page 110 of Internal Revenue Bulletin 2007-29, available at www. 140 ez form irs. 140 ez form gov/pub/irs-irbs/irb07-29. 140 ez form pdf. 140 ez form When to file. 140 ez form   If an amended return is allowed, you must file it by the later of the following. 140 ez form 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. 140 ez form A return filed before an unextended due date is considered filed on that due date. 140 ez form 2 years from the time you paid your tax for that year. 140 ez form Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. 140 ez form You generally must file Form 3115, Application for Change in Accounting Method, to request a change in your method of accounting for depreciation. 140 ez form The following are examples of a change in method of accounting for depreciation. 140 ez form A change from an impermissible method of determining depreciation for depreciable property, if the impermissible method was used in two or more consecutively filed tax returns. 140 ez form A change in the treatment of an asset from nondepreciable to depreciable or vice versa. 140 ez form A change in the depreciation method, period of recovery, or convention of a depreciable asset. 140 ez form A change from not claiming to claiming the special depreciation allowance if you did not make the election to not claim any special allowance. 140 ez form A change from claiming a 50% special depreciation allowance to claiming a 30% special depreciation allowance for qualified property (including property that is included in a class of property for which you elected a 30% special allowance instead of a 50% special allowance). 140 ez form Changes in depreciation that are not a change in method of accounting (and may only be made on an amended return) include the following. 140 ez form An adjustment in the useful life of a depreciable asset for which depreciation is determined under section 167. 140 ez form A change in use of an asset in the hands of the same taxpayer. 140 ez form Making a late depreciation election or revoking a timely valid depreciation election (including the election not to deduct the special depreciation allowance). 140 ez form If you elected not to claim any special allowance, a change from not claiming to claiming the special allowance is a revocation of the election and is not an accounting method change. 140 ez form Generally, you must get IRS approval to make a late depreciation election or revoke a depreciation election. 140 ez form You must submit a request for a letter ruling to make a late election or revoke an election. 140 ez form Any change in the placed in service date of a depreciable asset. 140 ez form See section 1. 140 ez form 446-1(e)(2)(ii)(d) of the regulations for more information and examples. 140 ez form IRS approval. 140 ez form   In some instances, you may be able to get approval from the IRS to change your method of accounting for depreciation under the automatic change request procedures generally covered in Revenue Procedure 2011-14. 140 ez form If you do not qualify to use the automatic procedures to get approval, you must use the advance consent request procedures generally covered in Revenue Procedure 97-27, 1997-1 C. 140 ez form B. 140 ez form 680. 140 ez form Also see the Instructions for Form 3115 for more information on getting approval, including lists of scope limitations and automatic accounting method changes. 140 ez form Additional guidance. 140 ez form    For additional guidance and special procedures for changing your accounting method, automatic change procedures, amending your return, and filing Form 3115, see Revenue Procedure 2011-14 on page 330 of the Internal Revenue Bulletin 2011-4, available at www. 140 ez form irs. 140 ez form gov/pub/irs-irbs/irb11-04. 140 ez form pdf. 140 ez form (Note. 140 ez form Revenue Procedure 2011-14 is clarified and modified by Revenue Procedure 2012-20. 140 ez form For more information, see Revenue Procedure 2012-20 on page 700 of the Internal Revenue Bulletin 2012-14, available at www. 140 ez form irs. 140 ez form gov/pub/irs-irbs/irb12-14. 140 ez form pdf. 140 ez form )   For a safe harbor method of accounting to treat rotable spare parts as depreciable assets, see Revenue Procedure 2007-48 on page 110 of Internal Revenue Bulletin 2007-29, available at www. 140 ez form irs. 140 ez form gov/pub/irs-irbs/irb07-29. 140 ez form pdf. 140 ez form Table 1-1. 140 ez form Purpose of Form 4562 This table describes the purpose of the various parts of Form 4562. 140 ez form For more information, see Form 4562 and its instructions. 140 ez form Part Purpose I • Electing the section 179 deduction • Figuring the maximum section 179 deduction for the current year • Figuring any section 179 deduction carryover to the next year II • Reporting the special depreciation allowance for property (other than listed property) placed in service during the tax year • Reporting depreciation deductions on property being depreciated under any method other than Modified Accelerated Cost Recovery System (MACRS) III • Reporting MACRS depreciation deductions for property placed in service before this year • Reporting MACRS depreciation deductions for property (other than listed property) placed in service during the current year IV • Summarizing other parts V • Reporting the special depreciation allowance for automobiles and other listed property • Reporting MACRS depreciation on automobiles and other listed property • Reporting the section 179 cost elected for automobiles and other listed property • Reporting information on the use of automobiles and other transportation vehicles VI • Reporting amortization deductions Section 481(a) adjustment. 140 ez form   If you file Form 3115 and change from an impermissible method to a permissible method of accounting for depreciation, you can make a section 481(a) adjustment for any unclaimed or excess amount of allowable depreciation. 140 ez form The adjustment is the difference between the total depreciation actually deducted for the property and the total amount allowable prior to the year of change. 140 ez form If no depreciation was deducted, the adjustment is the total depreciation allowable prior to the year of change. 140 ez form A negative section 481(a) adjustment results in a decrease in taxable income. 140 ez form It is taken into account in the year of change and is reported on your business tax returns as “other expenses. 140 ez form ” A positive section 481(a) adjustment results in an increase in taxable income. 140 ez form It is generally taken into account over 4 tax years and is reported on your business tax returns as “other income. 140 ez form ” However, you can elect to use a one-year adjustment period and report the adjustment in the year of change if the total adjustment is less than $25,000. 140 ez form Make the election by completing the appropriate line on Form 3115. 140 ez form   If you file a Form 3115 and change from one permissible method to another permissible method, the section 481(a) adjustment is zero. 140 ez form Prev  Up  Next   Home   More Online Publications