Fixed Assets – Preparing for October Personal Property Tax Forms

As October approaches, you can expect to receive a multi-page form from your city or town asking for a lot of information about the property that your business owns or leases. This information needs to be returned to your town or city assessor’s office by November 1st as they use this reported information to generate the annual Grand List and associated tax bills.

Many businesses put off completing these forms because gathering the information is time-consuming and tedious. QuickBooks has features that help tremendously in completing these forms quickly and they include the Fixed Asset Listing.

calculatorFixed Assets are capital expenses including furniture, fixtures (shelving, etc.), computer equipment, machinery, and equipment. Inventory is not included as a fixed asset. Vehicles are taxed separately based on DMV records. Leasehold improvements are not taxed as personal property – they affect the value of the building and real estate taxes.

The important information that a business needs to keep regarding fixed assets is what it is, when it was purchased, if it was purchased new or used, and when it was disposed of or sold.

In order to make this simple in QuickBooks, here are the steps to take:

1. Update Chart of Accounts
Make sure that your Chart of Accounts includes Fixed Asset type accounts for each of the reported categories above: vehicles, computer equipment, furniture and fixtures, machinery and equipment, etc. so that these accounts correlate to the sections of the property tax return form.

2. Add to the Fixed Asset Item List
From the Home Page in QuickBooks, choose Lists/Fixed Asset Item List. Adding your existing fixed assets in this list will not affect your financials at all. Enter each item with a unique Asset Name/Number, just like when you add new items or services. You must enter a Purchase Description, date purchased, new or used, purchase price, and an Asset Account (aka the Fixed Asset type account from your Chart of Accounts such as “Vehicles”, “Furniture & Fixtures”, etc. as noted in the above paragraph). Any other information you wish to enter is up to you. You will note that the Vendor box does not include a vendor drop-down list of your QuickBooks vendors.

3. Run Reports
Once you have entered all your existing assets, you may run a report to confirm the totals closely mirror the amounts on your Balance Sheet. Choose Reports/Lists/Fixed Asset Listing. First you may want to run this report sorted by Account, export it to Excel and sum the totals for each Account to make sure you have all the computers, machinery, vehicles, etc. set up as a fixed asset. The totals by Account should mirror your Balance Sheet. If they do not, your Balance Sheet may be understated because you have acquired new assets that you posted to expense accounts instead of fixed asset accounts. Your Balance Sheet may be overstated because you have sold or disposed of some assets and the changes were not recorded properly. Either way, start with making sure the Fixed Asset List is correct and work with your CPA to correct your Balance Sheet.

Now that you have put in the past items purchased, as you continue to use QuickBooks, you can add a fixed asset item “on the fly” when you enter a check or bill or credit card transaction. Simply toggle from the “Expense” tab in the body of the transaction to the “Item” tab and click on the first line to “Add New” – this allows you to add a new item, service, or fixed asset. Once a fixed asset item is created, you can also sell the item through an Invoice or a Sales Receipt. Adding the asset when it is purchased and selling the item when it is disposed of or sold keeps your Fixed Asset Listing up to date. These transactions – bills, checks, sales receipts – do affect your Balance Sheet as well in order to keep the total fixed asset values correct.

Property Tax Forms

Each October, run your Fixed Asset Listing Report, modify the report to include the date ranges that correlate to the personal property tax form, i.e. 10/1/13 to 9/30/14, then sort these items by Account. Memorize each report by these date ranges for future ease: “Property Tax Form Report 2014” (dates 10/1/13 – 9/30/14, “Property Tax Form Report 2013” (dates 10/1/12 – 9/30/13), etc.

Keep your insurance company apprised of any changes to your total property value so that you are covered for full replacement cost. And of course, keep the list handy to send with your financial reports to your CPA at year end so that he/she may calculate the depreciation adjustments easily.

Some initial work on your part to get your fixed assets entered into QuickBooks will pay off in the long run in all three areas: your personal property tax return, your annual tax filing, and your insurance coverage.

Go to the Dressler Santaus web site.