The Ambitious Bookkeeper Podcast

84 ⎸ Don’t forget about Tangible Property at Year End

February 08, 2023 Episode 84
The Ambitious Bookkeeper Podcast
84 ⎸ Don’t forget about Tangible Property at Year End
Show Notes Transcript

Everyone is talking about 1099s right now but there’s another tax form you should be aware of as a bookkeeper. I’m going to give you my year end pointers in this episode so you catch many of the things your clients need to handle at year end. Or that you can handle for them, and be the expert they rely on to know these things!

In this episode you’ll hear:

  • Business Property Tax
  • 1099s
  • Annual Corporation filings

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Do you have clients with physical locations like offices with lots of furniture and desks and cubicles or a manufacturing plant with lots of equipment. Or a storefront. With shelving and other equipment or a cafe with lots of small equipment and furniture? Well, most states call this tangible business property or tangible personal property, even though it's for business. And guess what. It's taxable. So in this episode, I'm going to talk about adding this to your year end process, to at least check, to see if your clients need to file anything. 

 

I always say that bookkeepers are the first line of defense on all things tax, whether we want to be or not. It is usually up to us. If we want to be experts to know all of the things businesses need to be aware of, even if we don't handle it for them. So that we can at least tell them, Hey, bring this up to your CPA or, Hey, you should find someone to file this for you. But there are some things that a business owner might expect us to handle. 

So we may as well learn it and add it to one of our higher level packages. Sales tax in tangible business property fall under this, in my opinion. So when I was in corporate, I was responsible as a staff accountant to file this tangible business slash personal property form each year in every role that I was in. And so when I was on the phone with someone recently, I was like, Hey, I just got off a client call. And she's like, what are you going to do the rest of the day? I was like, well, I'm researching, like when we need to file this tangible business property form for this business, because they just opened a store. And she was like, what is that? 

And so I explained it to her, like if you have equipment in your business, most online businesses don't cause all we have is like a desk and a computer, but if you have a physical location, you are then on the radar of your state or county of having opened a physical location and so they will be knocking out your door or sending you a letter saying you're responsible for filing this form. But a lot of times it might not happen right away. So if you already know that this is a thing you should be doing this, or at least staying on top of the deadlines for your client. 

So any kind of equipment that you use in your business that's like small equipment. That's not attached to the building. However, some of these, as I'm going to get into the details, some states or counties are going to require you list out your lease hold improvements, and other like construction in progress. So honestly, if your client is leasing a physical building or as the owner of a building, you're going to want to pay attention to your specific state or county regulations on this. 

So I was responsible for filing this and really all you need to have is an accurate listing of all of the fixed assets for the company. You should be able to do this work with just that, which includes: the type Of equipment, the purchase price and the date that it was purchased and possibly the date that it was put into service. So it's good to have all of that information regarding fixed assets. Anyways. 

So who is responsible for filing this? As I talk about this, I'm actually going to be referencing the North Carolina department of revenue instructions for this form. But each state is going to have slightly different instructions. However, they're all pretty similar. You just want to pay attention just like with anything just like with 10 90 nines, just like with sales tax. Don't rely on sourcing your information from a blog, or a podcast like this, or a Facebook group, especially. Like don't go into a Facebook group and be like, Hey, does anybody know if I need to do this for Georgia or blah, blah, blah, blah, blah. And how to do it. No, you need to take it upon yourself, go to the department of revenue website for your clients, wherever you have clients. You need to brush up on what is required of them in that state. So obviously the more states and clients you serve, the more you're going to have to research and know, or at least know how to research and be willing to do it. But you need to go straight to the source. You need to pull up the form that you're supposed to be filing, and you need to read through the instructions. I'm giving you some tough love, but do not rely on even this podcast or someone else in a Facebook group to give you the information. You should know how to research this. 

So as I go through this, I'm using North Carolina as an example, so that you can be aware of likely what other states are also going to require. So on the instructions of the form, which usually each state is going to send out an updated form every year, because there's going to be a new row for each year and you also have to report prior year's stuff and it all needs to reconcile. So you can't go back and change anything from the prior year. And if there is a change, you're going to have to explain it. So be very good at your record keeping, please. 

So in the North Carolina instructions. It's usually attached to the form and it will usually say right at the top, when it's due for North Carolina, specifically, this form is due by January 31st. And it's not, I'll get into this, but it doesn't go to the state, it usually goes to the county. So who is responsible for filing? Well, North Carolina says any individual or business owning or possessing personal property used or connected with a business or other income producing purpose as of January 1st. So even though we're working this into our year end process. This is actually January 1st, 2023, as I'm recording this, that is when you need to take a snapshot of what their tangible. property is on January 1st. 

Temporary of absence of personal property from the place at which it is normally taxable shall not affect this rule. So it gives an example because that was like super jargony. Lawn tractor used for personal use to mow the lawn at your home is not going to be listed. However, a lawn tractor used as part of a landscaping business in this county must be listed if the lawn tractor is normally in this county. Even if it happens to be in another state or county on January 1st. So there's always going to be some exceptions, some rules and all the things. This is why it's very important to actually read the instructions yourself. 

Okay. The next thing it talks about is the penalty for not filing and it also bolds and highlights the due date again. It says they must be filed with the county tax department. Do not file this with the North Carolina department of revenue. And it will not be accepted by the department of revenue. It directs you to a list of the tax addresses that can be found in the revenue website for which county you have to file it. So wherever the business is physically located, and you are only doing it by location. So say for example, you are A bookkeeper for a locally owned like franchise or whatever, right. Where your client has multiple locations of a, let's just say a restaurant. Maybe they have a location in I don't even know all the counties in North Carolina, but they have a location in Raleigh and they have a location in Black Mountain and maybe they have a location in, I don't know where else in north Carolina. Right. So each of those locations are in a different county, so you're probably going to be filing a separate form for each location. And sending it to each different county. 

Where you file it, the county's tax department, like, like we said, the penalty in North Carolina is a class two misdemeanor. Meaning, if you willfully neglect to file this, it is punishable by 60 days, imprisonment as a class two misdemeanor. And that's the client's responsibility. It's not yours, but we are expected to know these things. Like I said, we are the first line of defense. So we are expected to know these things and bring them to our client's attention. Just in case they actually don't get a letter from the state. So just keep that in mind. 

And like I said, when it's due can vary depending on the county and the state specifically. Some of our clients in other states like Florida, there's isn't due until April 15th, but this one in North Carolina is due January 31st. 

So now we're getting into how to do this. In the instructions, it lists three important rules. It says, number one, read these instructions for each schedule or group cause there's different groups and different schedules on the form of different types of property. And it says to contact your county tax office, if you need additional clarification. 

Number two, if a schedule or a group does not apply to you indicate so. On. The listing form do not leave a section blank and do not write same as last year. You have to actually write the numbers for each year. A listing forum, may be rejected for these reasons and could result in late listing penalties or late filing penalties. 

Number three listings slash filings must be filed based on the tax district where the property is physically located. Like we already talked about this. If you have received multiple listing forms, each form must be completed separately. So in general, the state or county will actually send you these forms by paper, to your business address. But sometimes people change addresses and things like that. So your client may not even have gotten it in the mail or may not realize it. This is also another reason why it's very important to add to your year end list, to check their secretary of state filing, to make sure everything is current and accurate, and also to make sure it's been renewed. Cause that's usually an annual renewal sometimes at the beginning of the year, sometimes in like May. Depends on the state. 

Now as we get back into filing a business property filing, you do want to just read all of the instructions thoroughly. Once you get through like the initial instructions, there's always going to be a set of instructions for each section. So on the forums, there's usually a separate section for each type of asset class. So for example, you will have a group of machinery and equipment section. You will have office furniture and fixtures. You will have computer equipment sometimes in most states, a leased property and then they'll have like a supplies or expensed items section, and that's really more applicable for like, a restaurant business or, a larger business that has some supplies on hand that may or may not be inventoried. 

There might also be a vehicle section, farm equipment, maybe intangible property. And then there's always going to be a section on disposals and acquisitions. So acquisitions would be any new assets that they've acquired. So any new equipment you've acquired, and this is where it makes a lot of sense to keep really good records of your fixed assets. So every month when you're doing your month end close, you're looking at the balance sheet to see if the fixed asset section has increased. 

Or decreased, usually people don't record their dispositions. Are those the disposals? As they should, but you want to be looking at that fixed asset list. And every year you want to be putting that asset list in front of your client saying, I need all of the backup for these purchases. And I also need to know if you've disposed of anything on this list so we can write it off. And those that information that you get from them is going to be compiled into a list and put on this personal property or business property listing for their state and county. 

So. Fixed assets is a question. I get a lot about like doing a training on and whatnot. If you need more help on fixed assets, or things along these lines, I highly recommend, kind of self-educating. To be honest, maybe taking an accounting one-on-one class, if you've never dealt with fixed assets, there's a lot here to understand with depreciation and, and all that, but it doesn't have to be that complicated. 

Like I said, look at your balance sheet every month. See if the balance and fixed assets have changed, establish a threshold with your clients, on what is expensed versus put on the balance sheet and capitalized. And follow that rule. And keep notes of it in your client file so that you have a document. to lean back on of like, okay, anything under $2,000. We're going to expense anything over $2,000, we're going to put in fixed assets and you just need to keep a detailed Excel sheet of when it was purchased, what the amount is, the description of the asset. And, When it was placed into service. So sometimes you end up buying fixed assets. And it sits there for a while before it's actually placed into service. So you don't. Just start appreciating those fixed assets until they're placed into service in, they're starting to be used. 

And one thing that comes up a lot too, is depreciation. If your client's not on accrual basis, you're not likely booking depreciation. Like if they're just on a cash basis business. We, instance, our clients don't have a lot of equipment, but the ones that do we just wait until year end to book depreciation based off the taxes. But like I said, if your client is trying to do gap financials or accrual based financials. You may want to book straight-line depreciation every month and that's going to look different than what's on the tax return. 

So, anyhow I hope this was helpful. Kind of walking through some other things that you should or could be thinking about as a bookkeeper to add value to your clients. We will talk to you next week. Bye for now. 

 

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