written by David Myers

Farm, business and real estate owners forced to file additional new forms.

The IRS finalized new repair and capitalization regulations in 2014. They guide taxpayers on treatment of materials and supplies, capitalizing assets, and write-offs of property disposed. They affect nearly every business owner in America. Here is a look at the headaches and opportunities.

Top headaches caused by the repair regulations:

  • Nearly every business is required to file a form 3115 with the IRS by April 15, 2015. This form is for adopting accounting methods. It is costly to prepare and nearly impossible for a business owner to complete properly.
  • Anyone owning business real estate or rental real estate will be required to file an additional form 3115 as mentioned above.
  • Businesses must elect certain accounting policies on their 2014 income tax returns. The policies are very specific to the regulations and will require CPA assistance.
  • Taxpayer’s who don’t comply with these rules are subject to penalties. Tax preparers that misapply the rules have penalties as well.

Top opportunities to save taxes:

  • Assuming a business complies with the regulations, the IRS has made it clear that any expenditures for equipment less than $500 can be expensed.
  • Building and rental house owners can write-off portions of existing buildings and some prior improvements that are currently being depreciated. In 2014 only, a business or farm can look back at their depreciation schedule and write off “pieces” of the building that are no longer in service. Our experience is that this deduction can be large for taxpayers with significant real estate.

The regulations clarify what has been a fairly uncertain area of the tax law. In the long run businesses do have less risk of an adverse audit if they comply with the rules.

If you want to learn more about these changes, see our frequently asked questions here. Please contact us if you need additional information 417-881-0145.