amended tax return

[retire to nature]

Hi All,

I have mentioned I had some depreciation issue on my tax for one of rental properties. I lived the house 6month and turned to a rental property. and it was my first rental property. Maybe that's why it was missed with lack of knowledge to how to file for rental property plus change of CPA due to some issues.

I found that after this year tax return. I discussed with the current CPA and I offered I can let him know all the nurmbers to correct that. But he said he can do for it with the next year tax return. But he said I can not get the all the way back. but I need to pay recapture when I sell.

So I didnt do that this year, and got curious so google a few things. one website said i can do up to the past 3 yrs. IRS says electronic method can be done upto 3 yrs and paper file can be longer.

I wondered then why we didnt do this year at least get more years and waiting for the next year? CPA just said that way because of busy of tax season?

I bought it in 2015, rented in 2016

Thank in advance.

 

[COcheesehead]

Sounds like you need a new CPA.
I have always done my own taxes even when I had rentals. TurboTax is super easy to create an amended return. I needed to do one a few years ago and it took me 15 minutes.
You might consider doing your own taxes.
As far as depreciation, yes, it’s there for you when you own, but you pay recapture upon sale. No free tax lunch in real estate. They’ll get you one way or another.

 

[SecondCor521]

It's a bit unclear from your post.

I think you're saying that you either didn't claim depreciation or didn't claim the full amount of depreciation for your rental property on your 2016 through 2020 tax returns. And now your current CPA is saying not to bother with it or can't, and you suspect he said so because he's busy. But you still want to claim that depreciation properly.

Assuming the above, several comments:

First, you certainly can amend all available tax returns to claim the depreciation.
Generally, taxpayers must file a claim for a credit or refund within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. So you can probably amend only 2020 and 2019; 2018 is probably closed to you but would depend on the facts and circumstances there.

Second, regarding the method of amending: The timeframe to amend does not differ depending on how you file (efile vs. paper). If you e-filed your 2019 and/or 2020 tax return, you may e-file your amended returns for those years. The older years or any years in which you paper filed would have to be amended on paper.

Second, when you dispose of the rental property, you will have to pay recapture tax on the depreciation you could have claimed *regardless of whether you actually claimed it*. So it is to your advantage to amend your available tax returns to claim the depreciation.

There are various depreciation schedules, but it looks like rental property must be depreciated on a straight line schedule over 27.5 years. What this means is that your CPA cannot do any sort of "catchup" and claim the previous years' depreciation amount along with your 2021 depreciation on your 2021 tax return. That would be illegal and would open you up to penalties if you were audited, so hopefully the CPA is not suggesting that and I doubt he is. If he is suggesting that, then I would ask him for the IRS citation that allows it and if not satisfied would get a CPA who knows the rules and follows them properly.

Amending a return for any reason is generally a somewhat time consuming pain. Even more so if it involves multiple years. Even more so if it's on paper. Even more so for depreciation. Even more so if one didn't prepare the original return.

But if you want to and ask your CPA to do so, he should be able and willing to do so. It sounds like he doesn't want to do them, and he may not be 100% sure how to do them and maybe doesn't want to say that. If he didn't know how to do them, he should refer you to someone who does. If he doesn't want to do them, then I'd just expect him to charge you a lot of money to do the work.

Tax season is ramping up, so sooner rather than later is probably the time to do the amended returns.

ETA: I agree with the above - if you don't like your current CPA's abilities, ethics, or attitude, then you might consider a different one.

 

[retire to nature]

Sounds like you need a new CPA.
I have always done my own taxes even when I had rentals. TurboTax is super easy to create an amended return. I needed to do one a few years ago and it took me 15 minutes.
You might consider doing your own taxes.
As far as depreciation, yes, it’s there for you when you own, but you pay recapture upon sale. No free tax lunch in real estate. They’ll get you one way or another.

yes, I am thinking to change this CPA. I was hooked for the last couple years with him since he did my sister tax which I had no clue about it. But I am not much confident with him with the last years business.

 

[euro]

SecondCor521 gave a very good summary.
Bottom line as they said: you will have to recapture depreciation whether you took it or not. That's the law.
As to whether it is worth going back and filing amended returns (for those years you still can) you will have to determine yourself. It depends a lot on the specific circumstances such as the value of the dwelling on the property (as you know, the value of the land is not depreciated), your tax rate for the years in question, etc. If you took the depreciation last year, go check out how much in real dollars of a difference it made. If it is just a small amount, it may not be worth filing the amended return(s). If it is a considerable amount it may well be worth filing them, even if you have to pay the CPA to do it. It is not that hard, especially not for a CPA who did the original return.

 

[retire to nature]

to be clear this is my funny cpa history.

came from CA to MO in 2015. I didnt have a specific CPA in CA either. but no rental properties at all there. I did first year of US with my friend's part time job boss who owned sushi restaurant as well as CPA. First immigration year dont know much so relied on around ppl, right?

And I did turbo tax later years since mine was just simple, and met my ex hubby, used his parent CPA. but getting letters later for small things correction.

So I found another own because i didnt wanna share my financial info with my inlaws who were not getting along with me. so I found one he did one year and he seems good, and we got seperated and came to MO.

Same thing again, new enviroment, I relied on my sister she said her CPA was pretty good. He was ok and found out the last minute of the next filing season, he retired. oops.

Tired of looking CPA and was doubting I maybe thinking too much so one of my coworker's hubby was CPA, so I did with him. he was ok but yes he missed the depreciation in original post and missed some stock sell, I had to pay 5k for capital gain. Some of my fault not to provide complete report of sales but he didnt catch it either. I was newly hired at that time, later I found the coworker serious slacker and talker so I decided not to do with him just in case.

I found another CPA and told about my story, my last one was ok but didnt wana connect with coworker relationship. I took my previous year file with me. He said I need to find another one because your coworker is my daughter hahahaha really by accident.

so I found one near by my house he seems ok. I did with him for a couple years, but still didnt catch the deprecidation.

My sister sudden death happened. so had to use the current one since he had my sis record and i did mine with him. and he didnt know the depreciation either. I found it and mentioned to him.

 

[retire to nature]

It's a bit unclear from your post.

I think you're saying that you either didn't claim depreciation or didn't claim the full amount of depreciation for your rental property on your 2016 through 2020 tax returns. And now your current CPA is saying not to bother with it or can't, and you suspect he said so because he's busy. But you still want to claim that depreciation properly.

what i know it was claimed appliance part only. the 27.5 yr portion was missing. I found it after filed 2020 tax so was wondering why have to wait for 2022 to correct. it could have done in 2021.


Assuming the above, several comments:

First, you certainly can amend all available tax returns to claim the depreciation.
Generally, taxpayers must file a claim for a credit or refund within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. So you can probably amend only 2020 and 2019; 2018 is probably closed to you but would depend on the facts and circumstances there.

Second, regarding the method of amending: The timeframe to amend does not differ depending on how you file (efile vs. paper). If you e-filed your 2019 and/or 2020 tax return, you may e-file your amended returns for those years. The older years or any years in which you paper filed would have to be amended on paper.

Second, when you dispose of the rental property, you will have to pay recapture tax on the depreciation you could have claimed *regardless of whether you actually claimed it*. So it is to your advantage to amend your available tax returns to claim the depreciation.
yes I am clear that this post was to focusing on when for the best amending to get refund.

There are various depreciation schedules, but it looks like rental property must be depreciated on a straight line schedule over 27.5 years. What this means is that your CPA cannot do any sort of "catchup" and claim the previous years' depreciation amount along with your 2021 depreciation on your 2021 tax return. That would be illegal and would open you up to penalties if you were audited, so hopefully the CPA is not suggesting that and I doubt he is. If he is suggesting that, then I would ask him for the IRS citation that allows it and if not satisfied would get a CPA who knows the rules and follows them properly.

Amending a return for any reason is generally a somewhat time consuming pain. Even more so if it involves multiple years. Even more so if it's on paper. Even more so for depreciation. Even more so if one didn't prepare the original return.

But if you want to and ask your CPA to do so, he should be able and willing to do so. It sounds like he doesn't want to do them, and he may not be 100% sure how to do them and maybe doesn't want to say that. If he didn't know how to do them, he should refer you to someone who does. If he doesn't want to do them, then I'd just expect him to charge you a lot of money to do the work.
he said the amount would be pretty big.

Yes, he is a bit novice. He was under boss now he bought the business from the retiring boss. But he said my sister case was his first estate tax, he had to study alot.

Tax season is ramping up, so sooner rather than later is probably the time to do the amended returns.

ETA: I agree with the above - if you don't like your current CPA's abilities, ethics, or attitude, then you might consider a different one.

I was thinking going back to CPA near my house, but not sure since he missed the depreciation too.

 

[Philliefan33]

I might be remembering incorrectly, but was this rental property originally owned by your sister? If so, is it possible that she had it in service for 28 years and ran our the depreciation?

 

[SecondCor521]

I might be remembering incorrectly, but was this rental property originally owned by your sister? If so, is it possible that she had it in service for 28 years and ran our the depreciation?

I would think the transition to his ownership would start a new 27.5 year clock...wouldn't it?

 

[Philliefan33]

I would think the transition to his ownership would start a new 27.5 year clock...wouldn't it?

Yes, good point. I guess he would get the stepped up basis and start a new depreciation schedule.

I just can’t see how multiple CPAs would neglect to take the depreciation on a rental property.

 

[retire to nature]

I might be remembering incorrectly, but was this rental property originally owned by your sister? If so, is it possible that she had it in service for 28 years and ran our the depreciation?

no it is my own. since i dreamed FIRE for a long time. I bought it when i moved to MO.