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Audit Advisor Validations

Reviewing Assets for Tax Compliance

MACRS Depreciation Election

The Audit Advisor finds assets for which you have made one or more of the following MACRS depreciation elections:

  • Alternative Depreciation System (ADS): Assets use depreciation method AD, AA, RH, or RM
  • 150% declining-balance depreciation method over the General Depreciation System (GDS) recovery period: Assets use depreciation method MF150, MT150, MI150, MA150, or MR150
  • Straight-line depreciation method over the GDS recovery period: Assets use depreciation method MF100, MT100, MI100, MA100, or MR100.

Review your assets to determine if each MACRS election was made for an entire class of assets.

Issue

The system uses the IRS default depreciation methods during data entry for the tax related books. Taxpayers can elect to use the Alternative Depreciation System (ADS), 150% declining balance method, or the straight-line method over the General Depreciation System (GDS) recovery period for classes of property other than residential rental and nonresidential real property. The election is made on a property-by-property basis for residential rental and nonresidential real property.

This Audit Advisor finds personal property assets for which you have made one or more of the above MACRS depreciation elections, so you can review the assets and verify the election was made for the entire class of assets.

Resolution

  1. In the Asset List, display the group of assets that the Audit Advisor created.

The group is named AA (for Audit Advisor), followed by "MACRS Elec," followed by the book name, followed by the fiscal year end. For example, if you selected the Tax book and a fiscal year ending in December, 2022 in the Audit Advisor window, then the group would be called AA-MACRS Elec-Tax 12/22.

  1. Review the depreciation method and estimated life for each asset in the group.
  1. Make sure that each MACRS election was made for an entire class of assets. If an election was not made for an entire class of assets, then the non-conforming assets must be updated.