Tangible Property Wins Demonstrate AICPA’s Advocacy for Taxpayers

The AICPA continually advocates on tax matters to improve tax policy and administration for tax practitioners and taxpayers alike. Though the issues and challenges we grapple with could be difficult, our goals are simple: transparency, simplicity and certainty. Taxpayers and practitioners have scored a major victory for certainty and simplicity as AICPA-supported provisions in legislation will soon become law. Taxpayers will have to deal with fewer late and amended Forms 1099 that have $100 of income or less impact, fewer identity theft situations due to Forms W-2 will soon have truncated Social Security numbers, and clients will be able to rely on several permanent rather than temporary tax credits.

We also achieved more simplicity when the small business tax community received two big to make the “repair regs” more taxpayer friendly.

In February 2015, the IRS released Revenue Procedure 2015-20, providing the AICPA-requested relief that allowed taxpayers to prospectively apply the final tangible property regulations, eliminating a substantial administrative burden for small businesses. It also meant that many small business taxpayers did not have to file a Form 3115 to comply with the regulations.

The IRS also requested additional comments on the $500 de minimis safe harbor limitation for taxpayers without an Applicable Financial Statement (AFS). Taxpayers and the tax professional community had a lot to say, recommending increased de minimis thresholds ranging from hundreds to tens of thousands of dollars. The AICPA suggested $2,500 as a new de minimis amount and also recommended indexing the amount to inflation.

Their chief complaint was that the $500 threshold did not represent the cost of ordinary repairs or basic property purchases for small businesses that are less likely to have an applicable financial statement. Repairs or purchases of laptops or printers for small businesses can often range from $600 to over $1,000. Repairs of an oven in a small bakery shop or a commercial refrigerator in an ice cream shop could cost a lot over $500 with labor and replacement parts. Any of these basic expenses in excess of $500 were not protected from IRS audit under the safe harbor.

In the spirit of giving during this holiday season, at the end of November, the IRS released Notice 2015-82, which provides the long-awaited AICPA requested relief for small businesses. Starting in 2016, Notice 2015-82 increased the de minimis safe harbor threshold from $500 to $2,500 per invoice or item for taxpayers without an AFS.

The release of this notice prior to the end of 2015 allows taxpayers without an AFS to take advantage of the $2,500 de minimis safe harbor by implementing a required consistent accounting procedure or policy by the beginning of the 2016 taxable year.

For additional guidance, see the AICPA Quick Summary Chart and the IRS FAQs, which note the tangible property regulations safe harbor. And don’t forget to make the annual elections for the de minimis safe harbor in your timely filed tax return!

Ogochukwu Anokwute, CPA, J.D., Lead Technical Manager-Taxation, American Institute of CPAs.

Advocacy courtesy of Shutterstock.

Tangible Property Wins Demonstrate AICPA’s Advocacy for Taxpayers

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