On January 16, 2015, the Internal Revenue Service filed Revenue Procedures 2015-13 and 2015-14. These were released to give guidance on how taxpayers can apply for advance consent from the service for automatic and non-automatic changes in their methods of accounting.
For 2014 tax filings, this has been a topic of interest as it concerns how taxpayers report their deduction items such as repairs and maintenance as well as materials and supplies. Additionally, as part of the new repair regulations, the IRS has given more clear instruction as to the expectation of what items are required to be capitalized and how buildings and structures are reported as separate units of property. Over the past several years, proposed and temporary regulations had been released, but the final regulations, effective January 1, 2014, must be adopted by taxpayers. Compliance will include the requirement to file, in some cases, multiple Form 3115, Change in Method of Accounting, as well as additional statements and elections. These requirements have been designed by the service to ensure that taxpayers are clearly reporting income and to attain a level of consistency in this reporting.
So why are taxpayers required to file Form 3115? First, by requesting advance consent from the IRS for these automatic changes, a taxpayer will avoid the time required to file amended returns. Furthermore, by completing these filings as well as annual elections and statements, a taxpayer is acknowledging their understanding of the IRS regulations as well as their intent to be properly in compliance with them. This will also give taxpayers protection if for some reason their returns would come under audit.
Gathering the information necessary and ensuring that all policies in place are in compliance with the regulations can be a time consuming process. Barnes Dennig offers a comprehensive review of tax liabilities and methodologies that could help you identify compliance needs. Contact us here in advance of the filing deadlines to be sure that all of your information is assembled.