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Form 3115: It’s Not for Everyone Anymore! (And Thank Heavens for That!)

Great News—Actually, Make that AMAZING News:
The IRS is Simplifying Taxes and Repealing its Prior Decision that Would Require that Most Small Businesses File a Form 3115!

You read that right—the IRS is actually doing something to make all of our lives easier. Mind you, this act is, in our humble opinion, simply undoing a big mess of their own making, but we’ll take what we can get!

On Friday, February 13, 2015, we sent an email to all of our clients alerting them of the need to file Form 3115—the eight-page form that was required to adopt the new Tangible Property Regulations (TPR) that IRS passed in 2014 as part of the Affordable Care of 2010.

ALSO on Friday, February 13, 2015, the Internal Revenue Service waived the requirements to complete and file Form 3115 for certain small businesses. (You can read their announcement here:

We didn’t jump to conclusions, just like we didn’t jump to conclusions when they first announced the need to file a Form 3115. Instead, we investigated and researched and consulted with other CPAs to be certain, and now that we are, we are delighted to share this news with you!

Mind you, this does not repeal the new regulations; it only waives the requirement to file Form 3115 to adopt them. The new regulations related to depreciation and capitalization of expenses is still mandatory.

If this weren’t tax season, and we weren’t already working double-overtime, you can bet we’d be having one heck of a party. But since it is tax season, we need to get back to work. Before we do that, however…

Here are the answers to a few questions you might be asking:

“Why did the IRS change its mind?” We believe the IRS realized that they were going to receive millions of these 3115 forms and not have the manpower to process them. Their solution (and we think it was a good one!) was to make the new TPR an automatic adoption just by filing your 2014 return.

“What does this mean to me, and to my taxes?” You will automatically adopt the new TPR just by filing your 2014 return. For most people this means no extra paperwork, no additional fee for having to process and file the eight-page monstrous IRS Form 3115, no possibility of a $7000 fee for not filing the 3115 at the allotted time, and no possibility of our being fined or disbarred if we didn’t do our due diligence in overseeing your filing of the form. (Hooray!)

“Does this change the increased compliance with the new rules related to what I can expense and what I must capitalize and depreciate?” No, it does not ease the burden of accounting for business owners and real estate lessors. This was merely an automatic adoption of the new rules. This is still going to increase the time you spend reconciling receipts and the time we spend each month having to apply the new standards to any purchase your business makes over $500. Every repair, improvement, office supply, material expense must be scrutinized under the new TPR to determine how it is to be coded. These are the new rules and there appears to be no reform in sight to abolish these new regulations. (Boo.)

“The IRS doesn’t give anything away for free, so what’s the catch?” It appears that the only drawbacks to not filing the Form 3115 is that A.), you have no audit protection for asset dispositions for tax returns prior to 2014, and B.), you would not be able to use the partial asset disposition rules (if you scrap a transmission on a car, you wouldn’t get to expense the new transmission or write off the portion of the original car price that was allocated to the transmission). That’s about it.

“What about the $500 De Minimis Election?” This is an unrelated issue and not an Accounting Method Change requiring Form 3115. This is an annual election and still must be filed with your return if you want to expense items under $500. If you do not file, then anything over $200 must be analyzed to determine if it must be capitalized and depreciated.

“You guys must be pretty excited and relieved.” Yes, yes we are. We hope you are, too.

As always, our goal is to protect you and your business from unnecessary tax, penalties and fines. If you would like to discuss your return or this blog post with us, please do not hesitate to contact us at 352-333-7880.


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Tax Refund Fraud: Protecting yourself against the number one growing scam

With the 2013 tax deadline firmly behind us, many taxpayers believe they’re in the clear until the next deadline comes around. However, for many US taxpayers, the battle has only just begun. Millions of dollars’ worth of fraudulent tax refund checks are stolen because of identity theft, often times with unlicensed or non-certified tax preparers filing on behalf of their clients’ stolen identities. Identity theft and tax refund fraud topped the IRS’ annual Dirty Dozen list last year, in fact more identities were stolen in the first half of 2013 than all of 2012*, and efforts are underway to ramp up security and to increase protection against identity theft.

One of the major factors contributing to this scam, is the unchecked and unregulated tax preparer and accountant fields. According to the Fraud Magazine article, “Your Taxes: safer than a haircut?,” tax preparers have fewer state regulated standards than your average hair stylist, in fact, “only four states set standards for tax preparers, though nearly all 50 states license and set competency tests for those who cut hair.” Florida is one of those 46 states that do not require licensing, which is why ensuring that your current accountant and tax preparers are licensed as a Certified Public Accountant is just one of the few things you can do to prevent identity fraud.

You can help protect yourself against becoming a victim of identity theft and tax refund fraud by taking a few simple precautions, like not carrying your social security card with you, by properly protecting your financial information, computer or other digitized files, and checking your credit score consistently. The IRS has a short list of recommendations to minimize your chances of becoming a victim, and by being ProActive in your search for a competent, licensed certified public accountant.

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Amazon Lists Us as the Best Movers & Shakers!

by Beth Davies

Hopefully, you have seen our emails and other postings on our new book “Why didn’t my CPA tell me the THAT.” Pam and I are the authors of Chapter 3 – Hire Your Kids: Shifting Income to Your Child’s (0%) Tax Bracket! While I would hope you would want to read the book because our chapter is the best, I know that situation doesn’t apply to everyone. I do think everyone will enjoy Chapter 13 – Wacky Tax Write-Offs: Craziest Tax Deductions from the Certified Tax Coach Water Cooler. This chapter puts in perspective some of the strange write-offs you have heard about. It explains why in one circumstance a particular expense is deductible but in another it is not. It may get you thinking about your particular business and whether something you are currently doing could become deductible. The general rule is an expense needs to be “ordinary and necessary” for YOUR business. As this chapter indicates, what is ordinary and necessary in one business is not necessarily ordinary and necessary in another. Certified Tax Coaches are trained to look for these outside-of-the-box solutions.

I hope you enjoy the book and gain some beneficial information!

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1009 Season

January 30, 2014 by Beth Davies

Since this is the 1099 season and everyone is trying to send the required forms by the due date of tomorrow, I thought I would bring up a requirement that I recently became aware of.  Anyone involved in purchasing medical services in their business, is required to issue a 1099-Misc to the provider.  Normally, 1099-Misc are not issued to corporations but for medical services that exception does not apply.  Now, the item I was unaware of is, IRS looks at veterinarian services as providing medicals services.  When I read that I thought, DUH!  But I had not thought outside the traditional medical doctors.  Therefore, pet shops, farming enterprises and others that regularly use veterinarians will need to include them in their 1099 list of providers.  Hopefully, this hasn’t taken you by surprise like it did me.  I learned something new today.  Did you?

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Congress and the Fiscal Year

November 6, 2013 by Beth Davies

I just read an article in one of the accounting and tax newsletters we get on a daily basis.  We are all busy running our businesses and lives that we forget things. This article brought to the forefront of my mind the implications of not having Congress focused on what should be their priorities. They have been so busy with “fiscal cliff”, “government shut down”, that they are not taking care of little things.

Some tax provisions are set to expire on December 31st. While one of these will impact most Floridians, I guess they are not big dollar enough to get paid attention to now. We will lose the state and local sales tax deduction, the above the line deduction for qualified tuition and related expenses, the above the line deduction for certain deductions for public school teachers, Work Opportunity Tax Credit, the increase in expensing and the expansion of the definition of the Section 179 property, the Research and Experimentation Tax Credit and the 15 year straight line cost recovery for qualified leasehold, restaurant and retail improvements.

According to the article in Accounting Today, there are less than 10 legislative days left this year.  It doesn’t look like these will be addressed before the recess.  That means MAYBE when they come back into session a new tax law will be pasted that will retroactively reinstate these provisions.  What will that mean for you?  If they don’t reinstate, it means your taxes will be going up again for 2014.  Boy, I bet that’s a surprise to you!