The #1 error made on property tax returns is including assets in your filing that are gone. Summer is the perfect time of year to take an inventory of your fixed assets. The close of the property tax year is generally October 1st with property tax returns due on November 1st. This gives you three full months to plan, inventory and reconcile your assets to your records. Regardless of the time of year, if you haven’t done an inventory lately, now is the best time to do one.
The four key items to completing a successful physical inventory of your fixed assets are:
1. Prepare a fixed asset inventory plan to organize how you will conduct the inventory and who will perform the inventory. Decide your approach and time schedule for completing the inventory. Your plan should include guidelines for what assets are included in the inventory, tagging new assets, and the process for recording the inventory.
2. Communicate with other departments when you will be performing the fixed asset inventory. Utilizing department staff to complete the inventory can save time. They can be very helpful locating missing or moved assets that were assigned to their department.
3. Schedule enough time to complete the inventory. A fixed asset inventory takes a chunk of time. Devoting one or more full days to taking a physical inventory of your fixed assets can leave you behind in other areas of your work. Allow time to reconcile the physical inventory to your accounting records. Spreading the project out over a week or more can allow you to complete the inventory with current staff without overloading your work level. Additional time should be scheduled for finding missing or moved assets.
4. Reconcile the inventory with your accounting records. Match your physical inventory with your fixed asset listing. Cross-reference your reconciled asset listing with your prior year property tax return. Property tax returns may include assets that are not in your fixed asset general ledger accounts. A separate listing should be maintained for those assets that are included on your property tax return but are not reflected in your fixed asset listing on the general ledger. Assets that fall into this category are generally assets that have been expensed. This list should be reviewed annually and items disposed of listed as disposals on the property tax return.