John Koskinen Saves Tax Season With Form 3115 Relief For Small Business

This post was originally published on Forbes Feb 13, 2015

That massive sigh of relief that you will be hearing over the next couple of days is coming from all the people who prepare tax returns for the little people (Those with average annual gross receipts of $10 million or less).  We had been gearing up to launch a tsunami of paper on the Ogden Utah IRS Service Center as the finalized repair regulations appeared to require every business entity, including individuals with modest Schedules C to file Form 3115.  IR-2015-29, just released, allows the accounting method change to be applied prospectively and waives Form 3115.  Here is the text.

The Internal Revenue Service today made it easier for small business owners to comply with the final tangible property regulations.

Requested by many small businesses and tax professionals, the simplified procedure is available beginning with the 2014 return taxpayers are filling out this tax season. The new procedure allows small businesses to change a method of accounting under the final tangible property regulations on a prospective basis for the first taxable year beginning on or after Jan. 1, 2014.

Also, the IRS is waiving the requirement to complete and file a Form 3115 for small business taxpayers that choose to use this simplified procedure for 2014.

“We are pleased to be able to offer this relief to small business owners and their tax preparers in time for them to take advantage of it on their 2014 return,” said IRS Commissioner John Koskinen. “We carefully reviewed the comments we received and especially appreciate the valuable feedback provided by the professional tax community on this issue.”

The new simplified procedure is generally available to small businesses, including sole proprietors, with assets totaling less than $10 million or average annual gross receipts totaling $10 million or less. Details are in Revenue Procedure 2015-20, posted today on IRS.gov.

The revenue procedure also requests comment on whether the $500 safe-harbor threshold should be raised for businesses that choose to deduct, rather than capitalize, certain capital expenses.

As I write this Revenue Procedure 2015-20 is not yet up on irs.gov.  Hopefully it will not require the sacrifice of a first born child in lieu of Form 3115.

I have to thank my friend Jeff Kristoff for alerting me to this release.  A little known fact is that you pretty much learn all the math you need to do tax returns by the fourth grade. 

 There are certain more arcane provisions, such as original issue discount, that can require more advanced skills.  Jeff was the guy I would always turn to when something requiring advanced math skills came up.  Jeff puts the excel in Excel.

I'm hoping that this announcement will help my blogging buddy Joe Kristan warm up to Commissioner Koskinen a bit.  I think Joe tends to be a little hard on the Commish and he will have to grant that he has done us a solid here.

I will follow up with an analysis of the revenue procedure soon.

Follow-up

A reader provided me with a link to Revenue Procedure 2015-20.  No sacrifices required.  I was thinking that they would at least want a goat.

Update

Tony Nitti was impatient to get something further out on the revenue procedure.  He didn't want to interfere with the claim I had staked out, but I considered it letting me off the hook, so I told him to go ahead.  Here is his Valentines Day post on the revenue procedure.  I still may do something additional, but I feel the pressure is off for the moment.