When will you receive your refund? The answer depends on how you filed your return. The IRS should issue your refund check within six to eight weeks of filing a paper return.
Miss last month's newsletter? No problem. We keep the last 6 months of newsletters here for you to read.
“OMG” - The new “repair regulations”
After years of work, the IRS has finally issued regulations clarifying for the business community when costs related to fixed assets must be capitalized and when they can be expensed.
The difficulty has been distinguishing between the two kinds of costs. Is the expense a "repair or ordinary maintenance" that can be deducted on the current year's tax return, or is it an "improvement" that must be capitalized and depreciated over the life of the asset?
Since deductions for capital improvements are typically spread over the life of an asset, the answer can be important even when accelerated depreciation methods are available.
While we were hoping for clarity and a bright line test, the answer to the repair versus capitalize question still relies on an anlysis of facts and circumstances. But this requires we learn a new word: Unit of Production (UOP). We must now analyze whether the expenditure improved the UOP.
Who is Impacted by Repair Regulations?”
The regulations will impact most taxpayers who have operating business (partnerships or corporations) or own real estate. This includes individual clients that file a Schedule C, E, or F with their tax return.
What Does this Mean to You?
The regulations are effective for tax years beginning on or after January 1, 2014, which means you will need to adopt the new rules when you filed you 2014 return. Since you are changing a depreciation method, you will need to file a Form 3115 (Application for Change in Accounting Method).
The IRS is giving you a chance to file Form 3115 using the “automatic consent procedures” for a limited time. If you wait until the 2105 tax years, and depending upon your particular situation, filing the 3115 may require the more onerous manual consent procedures, which includes a $7,000 fee to the IRS.
What if you Don’t Comply?
If you are not in compliance with the new rules, you may encounter some of these issues:
What is the Process?
We will review your fixed asset depreciation schedule, calculate the adjustments and let you know how many Forms 3115’s will need to be filed. A different form will be needed with each asset class. We will calculate the adjustment on each and every item listed on your depreciation schedule.
Here is an overview of the regulations: