Update: The IRS issued Revenue Procedure 2015-20 0n Friday, February 13, effective for tax years beginning on or after January 1, 2014, that provide a “small business exception” for taxpayers to adopt the tangible property regulations without the filing of Form 3115, (Application for Change in Accounting Method), if a set of conditions are met.
Each separate and distinct trade or business (the most important requirement is that the activity maintains a complete and separable set of books and records, meaning the activity qualifies for its own methods of accounting on their own), qualifies for the small business exception if at least one of the following conditions is met:
- The activity has total assets of less than $10 million as of, or after January 1, 2014.
- Average annual gross receipts of $10 million or less for the prior three taxable years.
Taxpayers who use the small business exception will forfeit certain benefits that are only available to those who file Form 3115 for their first tax year beginning on or after January 1, 2014. Before your 2014 income tax return is filed, you must decide whether to apply the small business exception or file Form 3115 . Real property owners or lessees who have made improvements to their property in prior years may benefit from filing a Form 3115.
To help further determine the appropriate method for you or your business, please call or email your tax advisor at Linkenheimer LLP CPA. 707-546-0272
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