Your company has numerous assets – so many, in fact, that you likely find it difficult to track them all. Everything that your company owns that’s not real estate or buildings is personal property. This includes:
- Office supplies
With so many assets, how do you properly track and manage them? And the bigger question: how do you secure savings on your personal property taxes? Learn the six most effective actions you should take to improve your tax management strategy.
Understanding Your Personal Business Property Taxes
Some states tax business personal property and others do not. In states that do tax personal property, each jurisdiction has different protocols and procedures for tracking, reporting and collecting these taxes. The more locations your company has, especially if they are in multiple jurisdictions, the more challenges you face when managing your personal property taxes.
A related challenge is the sheer number of items that must be reported and tracked. Companies often fail to report their personal property accurately and completely. Another common mistake is leaving “ghost assets,” or assets no longer in your possession, on your personal property listing. If an item is not being used, has been misplaced or is broken, you shouldn’t pay taxes on it.
Because personal property tax management is complex, you need knowledge and time to do it right. Explore six of the most important steps you should take when developing a personal property tax management plan.
6 Steps To Improving Your Business Personal Property Management
1) Develop a plan. You wouldn’t take on a major business endeavor without creating an implementation plan: Hold your personal property management to the same standard. Determine who is responsible for managing personal property and the resources at their disposal. Do they have help from other employees? Are they able to regularly set time aside to update the asset listing? When you develop a plan, you’ll diminish confusion and streamline management.
2) Study your jurisdiction’s guidelines. Because there are so many variations among states with regard to taxes on personal property, it’s vital that you know your jurisdiction’s requirements. If you have properties in multiple jurisdictions, you need to understand all of their requirements, too. Assign someone from each location to understand that jurisdiction’s requirements so you’re prepared to follow them.
3) Create an accurate fixed asset listing. Be diligent about keeping your asset listing accurate and up to date. Leverage your accounting software and start by detailing all of your current assets, including their acquisition dates and current locations. Then, as you acquire new personal property or open new locations, you’ll add new assets. The resulting master list makes it easier to file your property taxes, and also makes you better prepared in the event of an audit. If that happened, you would already have the information ready to present, as long as you’re meticulous about tracking personal property.
4) Update the listing regularly. The detailed listing of your assets needs to be updated regularly with both additions and deletions. If you have equipment that you no longer use, dispose of it to remove it from the asset listing. Otherwise you’ll end up paying taxes on the value of an item you’re not benefiting from. If you have aging assets that no longer hold the same value as when you initially purchased them, that change in value should be reflected on your asset list as well. Invest time and effort in keeping your asset listing accurate so you won’t be scrambling at the last minute when it’s time to file your personal property tax return.
5) Look for applicable tax breaks or incentives. To attract business, many states offer tax breaks or incentives. To secure these benefits and increase your savings, research available tax breaks that may apply to your business. For example, some states offer a Freeport Inventory Exemption, in which you don’t have to pay personal property taxes on inventory that will be sold out of state in less than a year. But to qualify for this exemption, you have to meet the jurisdiction’s specific requirements and file extensive paperwork by the deadlines.
Another common type of exemption is based on sustainable business practices. Steps you take to be energy efficient or environmentally friendly could qualify you for government-provided tax exemptions. Research state and federal programs you could be eligible for. When you’re proactive about securing tax breaks, you’ll save on your personal property taxes.
6) Work with a property tax expert. Ultimately, personal property tax management is a complex job that many companies don’t have the resources to perform internally. Consider partnering with a commercial property tax expertcommercial property tax expert to get the most savings from your personal property taxes. An expert will be familiar with potential tax breaks and know what to do if you’re audited. You’ll also have more time to get back to your daily work, instead of meticulously itemizing every piece of equipment, from big machines down to office supplies.
When you familiarize yourself with the intricacies of personal property, you’ll build a strong foundation for securing potential savings. Take time to research the topic and look for a qualified, experienced property tax expert to walk you through the process.
Want to learn more about personal property taxes and how to manage them effectively? Schedule a free consultation now.