in September 2013, the Department of the Treasury finalized rules for the capitalization of tangible property, with the purpose of clarifying the line between expenditures that should be deducted as repairs, and those that must be capitalized and depreciated. These new rules apply to every business taxpayer (sole proprietor-Schedule C, rental property- Schedule E, farmer-Schedule F) who acquires, produces, or improves tangible property, and are in effect for tax years beginning on or after 1/1/2014.
Up until yesterday, February 13, 2015 (yes, a Friday the 13th), the IRS position was that almost every taxpayer with a business or rental property should file Form 3115, Application for Change in Accounting Method, (a complex eight page form not including required explanations) with their 2014 tax returns and a duplicate copy to the IRS in Ogden, Utah.
After CPA firms have spent countless hours working to make sure our clients are compliant with these regulations, the IRS announced in Rev. Proc. 2015-20 that this complex filing may not be required for small businesses, including sole proprietors, with assets totaling less than $10 million or average annual gross receipts totaling $10 million or less.
For most taxpayers, this is a welcome relief.
For CPA’s, trying to follow the IRS regulations is like a dove hunt, it is really hard to hit (or comply in this case) with a moving target.