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01/21/2015

Comments

Diana Tiberia

Please clarify this new regulation for me. If, beginning with 2014, we expense everything less than $500 , we do not have to file a Form 3115 or submit an election statement? Also, is this retroactive to assets on depreciation schedules prior to 2014?
Your guidance on this would be greatly appreciated, since this matter has not be discussed in any tax update course that I have taken.

Joe Sherfy

I've been discussing these rules for the past week with other practitioners and at least regarding the materials and supplies rules I am not sure I get the reason for having every entity file a 3115. I've been very conservative over the years with my clients. If something in their books looked like a fixed asset purchase of more than 100 I would capitalize it. My thinking was that I could then just 179 it if we needed to and we would not have any or many questionable items if audited. Fixed assets of less than $100 I deducted and then all items that looked like supplies we would expense.

So here we are in 2014. I guess if I want to I can file the 3115 and deduct anything less than $200, right? Okay so I could file the 3115 and do that

BUT what if I don't? What if I file no 3115 and keep doing what I have been doing? What would the IRS do? Are they going to come in and make me expense the items I set up as fixed assets for $150 because they are less than $200?

Then there is a practical side. Most of my clients are of modest size. Is the IRS really going to audit my client and review these very small expenditures and make an adjustment of some sort? My gut feeling is no. In 30 years of doing tax returns I am not sure I can even remember an auditor questioning what was capitalized and what was not. Now maybe if you have a large company its a different story, but all of my clients gross revenue is less than 10 million per year.

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