IRS Releases FAQs on the Final Tangible Property Regulations
This tax season, the accounting profession has been dealing with the complexities of implementing the Final Tangible Property Regulations. The rules, commonly referred to as the Repair Regs., are filled with uncertainty and complex procedures which have created confusion for both tax preparers and their clients.
Almost a month ago, with the issuance of Rev. Proc. 2015-20, the IRS relieved small taxpayers, those with less than $10 million of total assets or gross receipts, by granting optional simplified filing procedures for qualified taxpayers. The Rev. Proc. was a big relief for most taxpayers.
Last week, the IRS released a FAQ page to provide additional guidance in an easy to read format. The FAQ page is directed toward small business owners and self-employed individuals and covers the following topics:
- Do the tangible property regulations apply to you?
- A de minimis safe harbor election
- Clarified rules for the treatment of materials and supplies costs
- A regulatory framework for analyzing whether expenditures are for deductible repairs or capital improvements
- What is the facts and circumstances analysis for distinguishing capital improvements from deductible repairs?
- What are the simplifying alternatives to the facts and circumstances analysis?
- How do these regulations coordinate with other provisions of the IRC?
- When and how do you apply the final regulations?
- When and how do you make elections under the final regulations?
- When and how do you change a method of accounting to use the final regulations?
- Simplified procedures for small business taxpayers
The new regulations affect almost every taxpayer and are very complicated. Each communication from the IRS on the subject provides welcomed clarity and insight into the IRS’ procedural views of these rules, yet for many taxpayers, questions still remain.