The TaxSpeaker's opinion re Repair regs & Form 3115 - What is yours?

[BOB W]

I found this post which

seems to differ, a little, from some posts here......

http://www.aicpa.org/Publications/TaxAdviser/2014/may/Pages/clinic-story-04.aspx

[JON]

I was corrected

The election ($500) is once in house and yearly on the return..

[Lion]

The NATP webinar included filled in examples of 3115 for different reasons. Well worth the $52 or so to get the slides and examples. For Repair Regulations, 1 Change No. "See Statement" followed by some checkmarks in Part IV 24-27. "Statement 1 Form 3115, Part I, Line 1 Change numbers 184, 186, and 187" (those numbers can be done on one 3115.) You'll give short and sweet explanations, such as Change 187: Adopting the timing for deduction of incidental material and supplies. And, yes, you will have $0 on your statement.

[Lion]

"To comply with...."

[ttbtaxes]

Has anyone seen what a sample Form 3115 would look like where a taxpayer is filing with a $-0- change. I'd be very interested in seeing the language used.

[Gretel]

Agreed

Some additional thoughts. The election at the business place is once unless changed. The election for the tax return is every year. The election does not have to be in writing (unless AFS are required) but the business needs to apply this election. With my businesses I actually don't see anything changed. When they do their own books they post assets anywhere not matter what the policy is and leave it up to me to put it in the right places. I don't see how that could be held against them.

The problem with forms 3115 f.e. for the safe harbor for routine maintenance, I see is that from now on we have to ask for all tax returns (new clients) going back to 2014 or maybe even 2013 to see if this form was filed. How would we know in 2020 that we can use this safe harbor if we don't know if the 3115 was ever filed.

[JON]

Tax software has nothing to do with the election,

the election has to be made before the beginning of the year. It is made at the clients for the client.. It has nothing to do with the 3115. Now the pros and cons of making it is another topic.

[AZUKHiker]

Election is Annual

And the election is made on an annual basis, correct? It would only apply to the year so elected?

Correct, needs to be done each year. Hopefully most tax software will have a tick box for this.

[Burke]

And the election is made on an annual basis, correct? It would only apply to the year so elected?

[Golden Rocket]

Minimize need for 3115

Most of you are more astute in these areas but with respect to many of you I believe we are creating unnecessary (and unwanted) reasons
to file 3115.

I'm probably prejudiced, because I don't like the 3115 anyway. But the following reasons jump out at me:

1) Much of the new regs with respect to capitalization involve taxpayer elections. A taxpayer election should
NEVER give rise to a 3115. It is not a change in an accounting method.
2) Issuance of new tax laws or regs which FORCE changes in the methods of a taxpayer should not by itself
create a need for a 3115. These are not taxpayer-directed.

Whereas I must agree that depreciation/capitalization policies are essential, they should not be so rigid as to prevent annual elections
which already exist. Selection of a depreciable life, bonus depreciation (if it exists), section 179 amounts, etc. are available on a
broad basis to all taxpayers.

The idea of filing multiple 3115s is really scary, and is a possible giveaway that we are going overboard on issues that may not
require any at all.

[JON]

The $500

is a yearly election made by and at the client. Has nothing to do with 3115 - Correct??? It needs to be done annually.

[AZUKHiker]

Agreed there is more to RP 2014-16 and 2014-17

I agree that there is more to these two RPs than just the $500 election. I am just focusing on what will apply to most small businesses and rentals which make up the majority of tax preparers' business and rental returns.

It is also interesting to note that there are simplified 3115 requirements for small businesses under these RPs and if I read it correctly cut off 481(a) adjustments, that will make any 3115 filing less onerous for small businesses.

Finally it is interesting that the IRS is only expecting 7,330 filings under RP 2014-16 and 1,600 under RP 2014-17 per the sections 6s of each RP. This implies that they don't think the RPs will apply to a large number of business or rental filers.

Hopefully the IRS will respond to the October AICPA letter in the near future so that we can get some clearer guidance on what is required for most small businesses.

[TXEA]

[QUOTE=New York Enrolled Agent;167060]Perhaps I misunderstand your point but it does seem to run counter to the preamble of the final regulations.

My point is this. Some things are a change in accounting method and require Form 3115 as per below:

(3) Covered Changes. Section 10.11 of this APPENDIX only applies to the following changes in methods of accounting:
(a) Changes under the final tangible property regulations. (i) A change to deducting amounts paid or incurred to acquire or produce non-
10 incidental materials and supplies in the taxable year in which they are first used in the
taxpayer’s operations or consumed in the taxpayer’s operations in accordance with §§ 1.162-3(a)(1) and 1.162-3(c)(1);

-----From Rev Proc 2014-16

If a taxpayer has previously deducted such items when paid as opposed to when consumed, then they have a change in method of accounting.

Rev Proc 2014-16 is worthy of a review is my overall point. I spend at least an hour or two a day everyday trying to figure this out. It is not as simple as making a de-minimus election for everybody.

[New York Enrolled Agent]

A business with $5,000 in gross receipts would need to file Form 3115 if they change their procedures on non-incidental materials and supplies (as an example).

Perhaps I misunderstand your point but it does seem to run counter to the preamble of the final regulations.

I. Change in accounting procedures not change in method of accounting

Several commenters questioned whether a change in a taxpayer's financial accounting procedures (for example, its financial accounting capitalization policy) is a change in method of accounting for de minimis expenses to which the provisions of sections 446 and 481 and the accompanying regulations apply. The final regulations provide that the use of the de minimis safe harbor is a taxable year election and may not be made by the filing of an application for a change in method of accounting. Thus, if a taxpayer meets the requirements for the safe harbor, which requires, in part, having written accounting procedures in place at the beginning of the taxable year and treating amounts paid for property as an expense in accordance with those procedures, then a change in the procedures, by itself, is not a change in accounting method. For example, if a taxpayer's written financial accounting capitalization policy at the beginning of 2014 states that amounts paid for property costing less than $200 will be treated as an expense, and the taxpayer changes its written policy as of the beginning of 2015 to treat amounts paid for property costing less that $500 as an expense, the taxpayer is not required to file an application for its 2015 taxable year to change its method of accounting for applying the de minimis safe harbor or determining amounts paid to acquire or produce tangible property under § 1.263(a)-1(f).

[Burke]

I knew I had seen that somewhere, and couldn't find it. These are the instructions for 3115 dated March 2012. Can't wait for 2014.