Related topics

Audit Advisor Validations

Reviewing Assets for Tax Compliance

MACRS Methods

MACRS Methods

The Audit Advisor finds assets using a non-MACRS depreciation method that were placed in service in a year for which MACRS depreciation methods are required.

Issue

Generally, all assets placed in service after 12/31/1986 must use a MACRS (Modified Accelerated Cost Recovery System) depreciation method. The Audit Advisor determines if you have assets using non-MACRS depreciation methods that were placed in service in a year for which MACRS depreciation methods are required.

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 Meth," 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, 2018 in the Audit Advisor window, then the group would be called AA-MACRS Meth-Tax 12/18.

  1. Review the depreciation method for each of the assets in the group.

If you determine that an asset is incorrectly using a non-MACRS depreciation method, then you need to change the depreciation method to a MACRS method (that is, MA, MR, AA, SB, MF, MT, AD, MI, RH, or RM).

Also, note that if you decide to change depreciation methods, you may be required to file a Form 3115 - Application for Change in Accounting Method.