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Proper Treatment of Section 179 in Accounting System

If we use Section 179 to expense the current year's assets, should we be reporting the Section 179 expense on the income statement in a separate expense account that runs in parallel to the current depreciation expense account? As background, we do not use GAAP to record depreciation on the books. Just to make things a little less complex, we record Federal tax depreciation on the books, hoping to minimize differences between books and the tax return.

We have a fixed asset software package that lives outside of the main accounting system, and we typically do journal entries for the year end depreciation, as well as gain or loss on sales of assets. Up to now we have not been making use of Section 179 (probably foolish, but it is what it is).

If anyone is familiar with Quickbooks, how should we be mapping the tax line for the current year depreciation and the section 179 expense accounts? Currently we map depreciation as an "Deductions: Other Deduction" rather than mapping it to the "Schedule M-1: Depreciation Per Books" line. Any thoughts on which is the better approach? Data will be uploaded to Lacerte if that matters....

Reply to
nish
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"nish" wrote

It might be appropriate to show in your books the Section 179 separately from regular depreciation. Especially so if someone outside of the business is looking at your financials. Seeing that item separate from regular depreciation also allows you to cross check that figure against the completed return to be sure that regular depreciation and Sect 179 are shown properly.

I would not trust the "tax line" designation to report the expense properly in return. But if you must, and if there isn't a separate line for Section

179, then either not assign it a line, then be sure you handle it through the software properly, or, assign it the same line as regular depreciation, then be sure you handle it properly through the software.
Reply to
Paul Thomas, CPA

The first problem is that you are under the mistaken impression that QuickBooks is an accounting system, thus your need for a third party fixed asset program. Solve that problem first.

Reply to
A Nonny Moose

We do have a professional accountant, and he wasn't familiar with the two specific options that Quickbooks offers for mapping depreciation to a tax account.

Please note that you didn't answer the questions I asked, either of them. I never asked should Section 179 be counted as a depreciation expense. My question was should the Section 179 be separated to a separate expense account in parallel to the normal depreciation expense account. Paul's response answers that question.

My second question was about Quickbooks and the specific accounts it makes available for depreciation account mapping to tax software. Obviously if Quickbooks offered a Tax account mapping to "Depreciation Expenses" I would use that. But they don't offer that straightforward map. What they do offer is "Schedule M-1: Depreciation Per Books". I wanted to know if that was an appropriate default mapping to use.

nish

Reply to
nish

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