Newsflash on Repair Regulations

Here is a news flash that we received on February 16th:

The IRS announced in IR-2015-29 relief for small business owners and their tax preparers waiving the Form 3115 filing requirements for those who are attempting to comply with the new “tangible property repair” regulations.

Since the repair regulations were issued, tax professionals have spent endless hours trying to figure out which business owner or rental building owner was required to file the Form 3115 or face the wrath of the IRS. Although there has been a lot of wasted time, it is good news that some relief is finally here.

A new simplified procedure is generally available to small businesses (that constitute separate and distinct trade or businesses), including sole proprietors, with assets totaling less than $10 million or average annual gross receipts in the three prior years totaling $10 million or less. Details are in Revenue Procedure 2015-20. Small business owners are allowed to make a prospective accounting method change in 2014 to conform to the tangible property regulations. No Form 3115 is required.

Even though the IRS has granted relief for small businesses, remember that:

  1. A prior-year disposition deduction still requires a Form 3115. (An example is taking a one- time deduction in 2014 to deduct costs related to a new roof when in a later year the roof was replaced.)
  2. Correcting prior-year errors in depreciation still require a Form 3115.