Blog April 27, 2020

Calculate fixed asset adjusted depreciation to comply with federal tax changes

By Beth Schwartz

It can be a daunting task to keep up with the federal tax changes, especially when changes are made right at tax season. Yet in times like today, it becomes critical to take advantage of every opportunity to manage the value of the business’s assets and to maximize refund opportunities.

In the TCJA of 2017, an error was made when the legislation failed to designate “qualified improvement property” (QIP) as 15-year Modified Accelerated Cost Recovery Systems (MACRS) property. The CARES Act (March 2020), while primarily focused on COVID-19 relief measures, did take time to remove the error from TCJA 2017. The CARES Act now designates QIP as 15-year MACRS property, and assigns a 20-year life if an Alternative Depreciation System (ADS) is elected or required. Significantly, this amendment is made retroactive to 2018, as if originally included in TCJA 2017. As usual, there are some rules and tests that must be passed that will allow you to choose the correct path forward.

While many organizations would argue there’s never a “good time” for tax changes, it’s not hard to see how this particular economic situation would pose a unique challenge for companies looking to make these updates to their accounting processes. If there’s anything that we’ve learned from the ongoing COVID-19 crisis, it’s that governments and businesses alike need to be prepared to respond to whatever circumstances might arise, no matter how unprecedented they are. Organizations need flexibility in their software solutions and in their processes in order to quickly adapt to new changes, even those brought about in the 2020 CARES Act.

How MRI Fixed Asset Accounting software can help

Users of MRI’s Fixed Asset Accounting software are already equipped with the flexible tools they’ll need to accommodate these tax changes. It only takes a few clicks to set up the updated depreciation method (ADS), and with the much-awaited correction to TCJA 2017, now is a great time to do it. Whether elected or required, the application has the ability to change the useful life of the asset together with the option of applying the bonus depreciation to the newly Qualified Improvement Property (QIP).

Using existing depreciation calculations and selection criteria in the software through US Taxation Settings, assets can easily be updated to reflect the appropriate tax rule over the defined period of time.

From the point of view of a simple math calculation, MRI Fixed Asset Accounting is ready to do the work. The 100% Bonus Deprecation method is available for use during a defined date range and can recalculate the depreciation for the previous year.

Better yet is the ability to make changes to assets in mass. Using the Mass Set Bonus Depreciation feature. This feature is here to help reduce the time and effort it takes to manage a long list of assets.

Using your fixed asset accounting system to overcome the transition to new tax rules is easier when you’re using a flexible system designed to adapt to change. When used to its full potential, MRI Fixed Asset Accounting can be a key factor to helping your organization navigate through these uncertain times and prepare for whatever may come next.

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