On Friday, February 13, the IRS released guidance on tangible property regulations offering relief to small business owners (taxpayer) to comply with the final tangible property regulations as it relates to the completion of IRS Form 3115-Application in Change of Accounting Method. Here is a breakdown of what it means to business owners:

Are you a small business?
A small business as defined by the IRS is a business with total assets of less than $10 million OR average annual gross receipts of $10 million or less for the prior three taxable years.

What changed?
Only the procedures for small businesses to apply for accounting method changes. No changes have been made to the De Minimis Safe Harbor or other elections.

Rev Proc 2015-20 permits small business taxpayers to make changes in methods of accounting prospectively (for tax years beginning on or after January 1, 2014) without filing a Form 3115 and solely through the filing of their Federal tax return.

How is it applied?
A small business taxpayer will need to compute an adjustment for the taxable year beginning on or after January 1, 2014 for any of the accounting method changes required under the repair regulations.

If the taxpayer has multiple accounting method changes, it must use this option consistently for all accounting method changes. If this option is chosen by the small business taxpayer, a late partial disposition election cannot be made.

The taxpayer will not receive audit protection for any of the taxable years beginning prior to January 1, 2014.

Comments regarding De Minimis Safe Harbor
The IRS is also requesting comments on whether it is appropriate to increase the $500 de minimis safe harbor limit for taxpayers without audited financial statements. This safe harbor allows for a deduction, rather than capitalize, expenditures under the threshold. Comments should be submitted by April 21, 2015.

For more information on these Repair Regulations contact Michē Needham, CPA at 716-856-3300.

Additional resources may be found at IRS.gov.

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