RENO, Nev. — All businesses are required to file a personal property declaration with the Washoe County Assessor each year, and pay tax based on the taxable value of their personal property — 2020/2021 Notices to File personal property declarations have already been mailed and are due by July 31, 2013.
Note that if a business fails to file a personal property declaration, the Washoe County Assessor will make an estimate of the property’s taxable value. Even if a business owns no property, it is still required to submit a declaration stating that fact.
The taxable value of property is determined based on the type of property, the amount paid for the property, and the year placed in service. The taxable value is reduced by a statutory amount of depreciation each year.
Here are five common errors taxpayers make that result in overpaying property:
1. Declaring the wrong cost of equipment
Many taxpayers report the same amount on their personal property declaration that they have on their tax depreciation schedules.
The amount of cost declared on your personal property declaration should be reduced by certain adjustments, including the sales tax paid when items were purchased.
2. Reporting assets that are no longer in service
Property does not fully depreciate for personal property tax, regardless of how old it is.
Even though the taxable value is reduced each year for depreciation, there is a residual amount that remains on the declaration and is taxed year, unless removed by the taxpayer.
If an asset has been removed from service in your business, make sure that it is also removed from the personal property declaration.
3. Selecting incorrect lives for assets
As part of the declaration you are required to select the appropriate asset class for each piece of property. If the wrong asset class is selected, the property may depreciate slower than it should, resulting in a taxable value that is higher than it should be.
4. Reporting assets that are exempt from personal property tax
The property required to be reported on the declaration is all property that is not “real estate” or “real property.”
Whether an item is considered personal property or a fixture of real property can sometimes be confusing.
Generally speaking, if an item is permanently attached to or permanently resting upon land or an improvement, and cannot be removed without substantially damaging the item or land, then it is considered a fixture that is not included in personal property.
Also, a piece of property that is not permanently attached to the land is considered a fixture if it is a necessary, integral or working part of the land improvement, designed or committed for use within the land improvement, or so essential to the land improvement that the land or improvement cannot perform its desired function without the nonattached item.
5. Not adjusting for assets that have lost value
If the property, or the total business, has a fair market value that is lower than the taxable value of the property, you can request a reduction in the taxable value.
Make sure you have a fresh set of eyes look at your personal property declaration to ensure you are not overpaying your tax. Also, know that you can request an extension of time to file the form.
Contact us to learn how. This memo is not designed to answer specific questions. Contact your tax advisor to get details on your specific situation.
Michael Bosma, CPA, is Principal-in-Charge of the Reno office of CliftonLarsonAllen LLP. His NNBW column, “Covering Your Assets,” focuses on effective planning strategies for every business owner. Reach him for comment at mike.bosma@claconnect.com.
-->RENO, Nev. — All businesses are required to file a personal property declaration with the Washoe County Assessor each year, and pay tax based on the taxable value of their personal property — 2020/2021 Notices to File personal property declarations have already been mailed and are due by July 31, 2013.
Note that if a business fails to file a personal property declaration, the Washoe County Assessor will make an estimate of the property’s taxable value. Even if a business owns no property, it is still required to submit a declaration stating that fact.
The taxable value of property is determined based on the type of property, the amount paid for the property, and the year placed in service. The taxable value is reduced by a statutory amount of depreciation each year.
Here are five common errors taxpayers make that result in overpaying property:
1. Declaring the wrong cost of equipment
Many taxpayers report the same amount on their personal property declaration that they have on their tax depreciation schedules.
The amount of cost declared on your personal property declaration should be reduced by certain adjustments, including the sales tax paid when items were purchased.
2. Reporting assets that are no longer in service
Property does not fully depreciate for personal property tax, regardless of how old it is.
Even though the taxable value is reduced each year for depreciation, there is a residual amount that remains on the declaration and is taxed year, unless removed by the taxpayer.
If an asset has been removed from service in your business, make sure that it is also removed from the personal property declaration.
3. Selecting incorrect lives for assets
As part of the declaration you are required to select the appropriate asset class for each piece of property. If the wrong asset class is selected, the property may depreciate slower than it should, resulting in a taxable value that is higher than it should be.
4. Reporting assets that are exempt from personal property tax
The property required to be reported on the declaration is all property that is not “real estate” or “real property.”
Whether an item is considered personal property or a fixture of real property can sometimes be confusing.
Generally speaking, if an item is permanently attached to or permanently resting upon land or an improvement, and cannot be removed without substantially damaging the item or land, then it is considered a fixture that is not included in personal property.
Also, a piece of property that is not permanently attached to the land is considered a fixture if it is a necessary, integral or working part of the land improvement, designed or committed for use within the land improvement, or so essential to the land improvement that the land or improvement cannot perform its desired function without the nonattached item.
5. Not adjusting for assets that have lost value
If the property, or the total business, has a fair market value that is lower than the taxable value of the property, you can request a reduction in the taxable value.
Make sure you have a fresh set of eyes look at your personal property declaration to ensure you are not overpaying your tax. Also, know that you can request an extension of time to file the form.
Contact us to learn how. This memo is not designed to answer specific questions. Contact your tax advisor to get details on your specific situation.
Michael Bosma, CPA, is Principal-in-Charge of the Reno office of CliftonLarsonAllen LLP. His NNBW column, “Covering Your Assets,” focuses on effective planning strategies for every business owner. Reach him for comment at mike.bosma@claconnect.com.
