Is your Copier Lease going to Trigger an IRS Audit?
Copiers are a necessary evil at an office.
These Volkswagen-sized monoliths suck time and money out of your business daily. I’ve never met anyone who leases a copier/printer that enjoys paying that bill.
Well, here’s another log on that fire…
As of 2019, your leased machine of any size must be put on your asset sheet at the ‘fair market value.” It cannot be treated as a rental-type monthly expense anymore. They must hit your balance sheet.
Operating Leases or Fair-market buyout option leases will be treated as an asset. If you lease multiple machines, this can seriously impact your financial statements.
“Fair Market Value” is a ridiculous notion. The dealer, who actually owns the machine, can put any buyout price they want on it. There’s zero transparency and no reference points in the document business. The dealers own the machines so in effect they dictate the costs.
Capital Leases, or dollar buy-out option leases, are set up more like a loan where you own the machine at the end for $1.
Both types of leases now need to be on your balance sheet. Your copier salesman’s arbitrary buyout number is now on your P&L’s. The consequences of not applying these machines correctly will sting.
Even worse, if you have a maintenance agreement (click charges, CPP for color/BW copies/ ) included in your lease, these now need to be separated into 2 agreements. That should be fun to unravel.
Have your leases audited and reviewed by an independent company, not a copier dealer or managed print services company. Alert your CPA that this is a new problem to be addressed under Topic 842.
Get your free assessment to uncover:
Identify IRS audit concerns and explore remedies
Expose excessive sales commissions and dealer profit
Remove excessive sales tax
Eliminate excessive property tax
Benchmark overall equipment and service costs
Eradicate escalations and entrapment clauses
Increase flexibility and control
Nobody on Earth wants to have the IRS knocking because of a copier. Contact DocuFrog.com for a free lease audit to see your options.
