Where is that computer listed on your personal property tax return?

Judd D. Lawrie, CPA, CVA provides us with some timely and easy-to-understand information regarding personal property taxes. He owns and manages Lawrie CPA Group – a tax and accounting firm that specializes in tax return preparation and tax consulting for closely held businesses and individuals. Deadline is May 15. Need help with your returns? Call (317) 886-7456 or Email Judd.

Indiana uses multiple tax mechanisms to generate revenue. Most of us are familiar with the income taxes for state, county and sales tax, but this article is about the state’s property tax system. Property tax is a state tax that is administered locally, for the local benefit. Last year, Marion County’s property tax revenue was almost $1.5 billion.

Business personal property taxes make up 35% of the property taxes collected. Personal property taxes are levied against equipment used in the production of income or held as an investment. Personal property values are assessed March 1 of every year and are self reported by property owners to assessors using prescribed state forms. The completed personal property return must be filed with the assessors no later than May 15. Taxes on the reported values are due in two installments - May 10 and November 10 - the following year.

A complete list of assets used in the production of income is necessary to file complete and accurate returns. Normally a fixed asset depreciation schedule works, but businesses should use care. Many companies have capitalization limits where anything under a certain amount is expensed. If an asset is fully depreciated, or expensed, it may not show up on fixed asset schedules.

I have had clients where a property tax auditor walks through their facility and asks “where is that computer,” or “where is that desk on this return?” The assets were not included because they had been expensed. The auditor had to change the client’s return and increase the tax liability. Fixed asset inventories are a good way to accumulate the data required for a complete return. Having a complete list of the company's income-producing assets will not only assist in preparing the property tax return, but it will provide evidence for taxing authorities if they want to challenge you, or for insurance purposes.

The state property tax system is a self reporting system where we, as taxpayers, report the proper amount of taxable personally property. By filing accurately and timely, it allows our localities to appropriately spread the tax burden and adequately budget their expenses.