New to Drake how to enter depreciation

[Tax Prep by Deb]

So I finally did it, I am switching to Drake for 2018 from ATX.  So far I'm figuring things out but have a couple of questions on depreciation.

I was wondering if one of you could explain the steps to input a new asset?  I struggled with this when I was doing one of their practice returns.  In ATX we would put the description date placed in service and use drop down to select class and the program took over from there.  Is this the same with Drake or do we have to tell it everything?  My first several attempts were a failure, but I finally did something to populate it but have no clue what I did.

Any help would be appreciated!

[Abby Normal]

Searching Drake knowledge base sucks! But I did find this:

https://kb.drakesoftware.com/Site/Browse/15034/4562-Data-Entry-Screen-Changes-Drake17?Keywords=4562+detail

[jklcpa]

This is the entry screen that Drake uses for all types of entities.

The minimum you'll need to enter is:

• Choose the entity type at top in the box labeled "For": My example is showing 1120, COGS, F because I had an 1120 open. On indiv returns it should show the schedules that the 4562 could relate to (A, C, E, F, 2106, 8829)
• Multi-form code - may be blank if you have only one form that all of the assets relate to. Examples of where this field is used is where there are multiple properties on 1040 Sch E, or where H and W each have Sch Cs or 2106s. Input where the 1040 has two property on Sch E would be a "1" for the first property and a "2" for the second one, and the properties would be designated in that same manner on the Sch E input screen. 
• Next line pretty straighforward:  enter description, date acq, cost. Bus use % is assumed 100% if blank. Chk box if "used" property. Use the drop down to pick the type of listed property if that applies.
• Method, use the drop down to pick the method. Ex - for a 7 yr property using MACRS GDS, pick MACRS(200DBHY) and the program will display an "M" in that box, or you can enter "M".  You'll see that those abbreviations like "M" appear in that drop-down list.  I'd suggest using the drop-down until you are more comfortable.
• You must enter the depreciable life. For the 7-yr asset, enter "7".  For residential rental, enter "27", not 27.5, but I think the system is forgiving and will accept both and just use the 27 even if you enter the decimal.

Other entries that may or may not be needed:

• If entering a new client with existing assets, enter salvage, prior deprec and prior 179 taken.
• For current year 179, bonus, and depreciation, the system will calculate but can be overridden on any field that has a "="   
• In that same section at left, "Force Convention" is where you can override to force it to use either half year or mid-quarter. The system does pick the appropriate method for current year acquisitions, but you might have to enter this for a new client with existing assets to be entered.

The columns for state, AMT, and Book work the same way and will populate some data. You will still have to enter depreciable life in those columns. The system will create a reports, depending on the state and your preference settings and report settings. It will also create a report for future depreciation too.

Other sections and drop-down boxes should be self-explanatory.

There are other intracacies of where to start the entries so that the 4562 is properly linked and associated with automobiles and mileage that are used for 2106 or Sch C and that also allows the system to determine the best method (mileage vs actual) too.

If you enter an acquisition date and then either select a method or life that was/is not available under the law for that year, the system will produce an error message.  Similarly, the system will generate an error if you override depreciation that exceeds depreciable basis or excess 179 (either for that individual asset or the year's limitation).   

I hope that makes sense. If you have other questions, please just ask.

 

[Abby Normal]

So, you really have to know your fixed asset class lives to get it right in Drake.

[jklcpa]

Perhaps. I personally haven't found that to be much of an issue and don't remember seeing complaints about it either.  Don't most preparers know the lives of common items that we deal with on a regular basis anyway, and if there's an oddball addition or we are unsure, shouldn't we be checking on the life anyway and not relying on a program to do our thinking for us?

I rarely used the full ATX depreciation and don't recall the level of hand holding it provided. Instead I chose to use the depreciation module from what was Creative Solutions that is now part of Ultra Tax, mainly for it's features for financial reporting, ease of handling bulk sales, and for creating a variety reports. Again, even with that program, I am not relying on it to come up with the proper useful lives. It does have drop down selections that will lead a user to a value, but even with that, any user that doesn't know the law may make an incorrect selection.

 

[Tax Prep by Deb]

Thanks.  You confirmed what I thought.  ATX for the most part makes the selections for you based on catefory.  A drop down menu lets you select class life based on item.  For example if it's a computer there is a category for that and when selected will put in the years, method, and convention for you.

I will keep practicing and if I run into a problem I will call on you guys for help.  It is a learning curve but so far I do like it.

[Catherine]

Please also note that the entire bottom half of the screen Judy posted gives details for reporting (asset management), dispositions (removal from service, sales, and group sales), and some state-specific fields.  

You can also - in the top half - access the bonus depreciation elections.  Unless there's a pressing need, I elect OUT of bonus depreciation for all my clients.  The state doesn't allow it, and keeping one schedule is hard enough for most clients to deal with.  Telling them there are two (and then explaining why the numbers are different on the two returns) is more trouble to me than most savings are worth to them.  You can choose a specific class, all classes, or a specific asset, to customize depreciation.

[Naveen Mohan from New York]

I did a Sub chapter S corporation in ATX and then I tried to replicate it in Drake. I used fixed asset schedule in ATAX and I used 4562 Depreciation Detail as outlined above in Drake. Yet my depreciation in ATX is not matching with Drake. ATX is giving me a slightly higher depreciation. I have double checked my input in both sides and my asset class, service life, Amount, Date installed, prior depreciation, prior bonus depreciation is matching yet answers are not coming out the same.

What other area should I be looking in.

Thanks 

Naveen Mohan

[Lee B]

When I converted earlier this year,I noticed that  Drake gives you a lot more method selections than ATX.

Several of the choices are a bit confusing, which is where I found my differences.

 

[jklcpa]

Naveen, the mid-quarter convention could also possibly be the cause. If this is a prior year asset that was already in service and subject to the mid-quarter rule, you can use the drop down or enter "MQ" in the "Force Convention" box:

[Naveen Mohan from New York]

Thanks Judy. I will try it

[Tax Prep by Deb]

Soooo very glad we have you guys to help us learn.  I am feeling more comfortable with the program.  I am going to keep practicing and hopefully by filing time I will have built up my speed.