Tax and financial advice from the Silicon Valley expert.

Small business relief from filing accounting change form

The IRS has announced relief in Revenue Procedure 2015-20 for small businesses and real estate investors relating to its new rules for repairs, materials and supplies, and capitalization.

Small business taxpayers with total assets of less than $10 million and average annual gross receipts of $10 million or less in the three years preceding 2014 (2011 – 2013) won’t have to file a change of accounting form, Form 3115, for 2014 after all.

The new rules will generally only apply for small business taxpayers to expenses incurred starting in 2014, and not retroactively as previously announced. The change of accounting will still be required to be made in statements included in the 2014 income tax return.

Some small business taxpayers still might decide to file the change of accounting method form if they want to take advantage of a new rule to claim a tax deduction for the undepreciated cost of a part of a building that was replaced, such as a roof replacement.

Small business taxpayers and real estate investors should still consult with tax advisors familiar with the rules to understand them and to make necessary elections on their 2014 income tax returns.

Tax return preparers and taxpayers will all have a sigh of relief from this announcement. This announcement will also save a forest for the mountain of paper forms that would have been required to be sent to the IRS and reduce the number of extensions for 2014 income tax returns.

We should all thank groups like the American Institute of Certified Public Accountants that tirelessly worked with the IRS for this modification of the requirements.

Repeal of expanded information return requirements passed by Congress

Congress has passed H.R. 4, The Comprehensive 1099 Tax Protection and Repayment of Exchange Subsidy Overpayments Act of 2011. The Senate passed the Act on April 5 and the House passed it on March 3. President Obama is expected to approve the Act.

The Act repeals expanded information reporting for payments to corporations and payments for goods or other property. (Huge sigh of relief!) The Act also repeal the application of information reporting requirements to operators of rental real estate. (Second big sigh of relief.)

The information reporting requirements are the same as they were before the enactment of the Patient Protection and Affordable Care Act (federal health care reform) and the Small Business Jobs Act of 2010.

Tax and financial advice from the Silicon Valley expert.