Plan Ahead to Get Ahead: Your Business Personal Property Taxes

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As 2015 comes to a close and you start setting your sights on family time and travel plans, it’s important to start looking ahead to the 2016 business personal property compliance season. This is the most opportune time to start planning and making sure that your books and records reflect the assets actually located at your business.

Texas state law requires that every taxpayer “shall render for taxation all tangible business personal property used for the production of income that the taxpayer owns as of January 1 of each year.” In layman’s terms, you must submit for potential inspection all items that helped your business produce income by Jan. 1. If you make a false statement on your rendition form, you could be found guilty of a Class A misdemeanor or a state jail felony under Section 37.10 of the Texas Penal Code. That being said, you can never be too careful.

A common issue that clients bring to our attention when requesting business personal property tax services is that they are paying taxes on machinery, furniture or computers that are obsolete, in disrepair, or are no longer owned. For example, if there is a large piece of machinery that is on your books but is technologically obsolete or dysfunctional, that asset must be reported to the county appraisal district on the annual rendition form. This applies even if this asset is sitting in a closet collecting dust. If you don’t report this equipment and your property is subject to a property tax appeal from the county appraisal district, when reviewing your books and records, the appraisal district personnel will add those assets to your account simply because they are still on the books. Their assumption is that it must have some value to you or it would no longer be on the accounting records.

Because of this technicality, it is in your best interest to ‘scrub your books’ of unnecessary business items. All obsolete or ‘ghost assets’ should be removed from your books and records as soon as possible before the New Year. We also recommend that you make this an annual part of your year-end accounting close, as it will save you money in the long run. So start your New Year’s resolution to get organized a little early this year and start scrubbing your books today.

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