One of the hardest taxes to swallow which Indiana business owners are subject to is the business personal property tax. This tax is assessed based on the value of all depreciable personal property that is being used by a business as of March 1st every year, and is payable May & November of the following year. A new business owner is generally aware of and expecting to pay payroll taxes and income taxes; on the other hand, when advised of the existence of the business personal property tax, the business owner begins to wonder how a profit can be made, when it seems the government’s hand is in his/her pocket at all times.
The following are three areas where mistakes or oversights by preparers are fairly common, and which a business owner should check to ensure that the business personal property tax is not being overpaid:
- The basis of the value of personal property a business owns and reports on its business personal property tax return is its depreciation schedule for federal income tax purposes. In many instances, the fully depreciated items that show up on a depreciation schedule have long been disposed of or retired from use by a business, but have not been deleted from the depreciation schedule. Therefore, they are included, in error, in the total value of property subject to tax on the business personal property tax return. The business owner needs to make sure that the depreciation schedule is being kept up to date from year to year, and only includes business assets that are currently in use by the business.
- Vehicles and trailers that are required to be plated with the Bureau of Motor Vehicles are not subject to the personal property tax. While the fact that vehicles should not be included in the total value of personal property subject to tax is generally caught by the preparer, it is more common that the value of over-the-road trailers are inadvertently included in the total value of personal property subject to tax.
- Application software is a depreciable item for federal income tax purposes, and is included on the federal depreciation schedule, but is not subject to the personal property tax. Again, the business owner should make a quick check or inquiry of the preparer to make sure these items are excluded from the business personal property tax return.