IRS Provides Relief for Small Businesses Regarding the Repair Regulations

The IRS recently released Rev. Proc. 2015-20 that allows a Small Business to easily comply with the Final Tangible Property Regulations. A “Small Business” is defined as any trade or business with under $10 million of assets or average annual gross receipts of $10 million or less for the prior three tax years.

The guidance issued by the IRS provides a Small Business taxpayer with relief from the burden of filing a Form 3115,Application for Change in Accounting Method, in order to adopt certain accounting method changes under the final repair regulations. Under the relief provisions, Small Business taxpayers are deemed to adopt the accounting method changes by simply filing their federal income tax return. In addition, Small Business taxpayers electing this relief will not receive audit protection for any tax years beginning prior to January 1, 2014.

The relief provided under Rev. Proc. 2015-20 is elective; therefore, a Small Business with significant adjustments may choose to file a Form 3115 to ensure proper documentation of the adjustments and to provide audit protection for prior year filings.

Highlights:

  • Rev. Proc. 2015-20 confirms that Small Business taxpayers who are adopting the Tangible Property Regulations on a prospective basis do not need to file Form 3115.
  • Rev. Proc. 2015-20 does not change the required procedures for making the following elections: the de minimis safe harbor, the small taxpayer safe harbor, or the election to capitalize repair and maintenance costs.

Please contact BSSF or your tax advisor if you have any questions regarding the Tangible Property Regulations.


ABOUT THE AUTHOR

Shawn E. Thoman

Shawn is a tax supervisor with Brown Schultz Sheridan & Fritz with over eight years of public accounting experience. Shawn specializes in tax compliance and tax planning services for partnerships and corporations. In addition, he provides multi-state tax planning strategies and compliance services to clients.