Best way to correct incorrect value for prior year asset?

[David]

New client has a real estate partnership. The previous accountant overstated one of the rental properties by ~ $34K. A small amount of depreciation was reported on the tax return since the property was purchased 12/07.

I am making an entry in 2008 to correct the value of this property. What is the best way to correct this on the asset manager and 2008 tax return without getting the error message that the beginning balance sheet asset does not match the asset manager?

Thanks.

[Karen Lee]

This answer should at least get some other opinions:

amend prior year to correct

prepare current year correctly

Karen

[David]

This answer should at least get some other opinions:

amend prior year to correct

prepare current year correctly

Karen

The 2007 depreciation amount was only $135 and the total tax return was a loss. So I'm wondering if it makes sense to file and charge the client for an amended tax return.

My question is related to the error message we get when the client's prior year balance sheet for assets does not match the asset values per the asset manager. What is the best way to handle the beginning asset balance?

For those of you who have had this problem in the past, have you just changed the beginning asset balance on the balance sheet or did you just file with the error message? Will the tax return be able to be e-filed with the warning error message?

Thanks.

[NECPA in NEBRASKA]

You can still E-file with the message. I get that message on all of my returns where I use another depreciation program.

Bonnie

[ed_accountant]

I would correct the current year only. Amending opens up the old year for review. You can always amend later if you need to.

[kcjenkins]

Given the small amount involved, I would not amend. I'd just correct the balance and go forward. The IRS does not appreciated amendments that make miniscule changes but required them to do a lot of work to process them. Nor is it fair to the client to have to pay for them, but not fair to you to do them for free.

I would correct the balance, no reason to have it continue to give you an error message.

[JohnH]

To expand the question a bit, does IRS even compare balance sheet entries year-over-year? I don't think so because I've seen returns with some pretty big discrepancies between the ending balance sheet for the return actually filed in the prior year and the beginning amounts for the return filed in a subsequent year. So I don't think the question would ever come up unless there was an audit, and then you could probably just trot out the old "de minimis" argument (provided it's true, of course).