Recent Posts
Summing It Up Breaking News –Tangible Asset Regulation Compliance Dates Changes
Full Implementation of Capitalization vs. Repair Regulations to Now Begin 1/1/2014
Taxpayers Have Option of Complying With Temp Regs for Tax Years 2012 and 2013
Author: Don Warrant
On Tuesday, the IRS and Treasury issued Notice 2012-73 alerting business taxpayers as to the timing of the issuance of the final regulations regarding the deduction and capitalization of expenditures related to tangible property and the changes they may contain. According to the notice, the final regulations will be issued in 2013 changing the effective date to taxable years beginning on or after January 1, 2014 while permitting business taxpayers early adoption during their 2012 or 2013 taxable years.
Prior to this change, taxpayers were given the option of compliance for the 2012 tax year, with mandatory compliance required for the 2013 tax year.
Key Change
Business taxpayers are no longer required to transition to the new tangible assert regulations before their 2014 taxable year but may choose to do so.
Recognizing that taxpayers are expending resources to comply with the temporary regulations, the Service and the Treasury Department are notifying taxpayers that the following sections of the temporary regulations will likely contain changes:
- De Minimis Rule which provided a safe harbor capitalization threshold for taxpayers with an applicable financial statement
- Dispositions of tangible property
- Routine maintenance safe harbor whereby taxpayers could establish a policy for expensing amounts that constitute routine maintenance to tangible personal property
The notice also states that Treasury is considering relief for small businesses. Taxpayers choosing to apply the provisions of the temporary regulations to taxable years beginning on or after January 1, 2012, and before the applicability date of the final regulations may continue to obtain the automatic consent of the Commissioner of Internal Revenue.
We will continue our series of blog posts on the new tangible asset regulations, with the most current information available on changes or updates. Should you have questions on how these new regulations impact your current tax planning, or whether you should consider compliance now, contact us here or call Don Warrant at 716-332-2647.
Capitalization vs. Repair Regulations - Unit of Property
Under the New Tangible Asset Regulations, It's Not the Same Ol' Unit of Property Calculations (Part 3)
Author: Don Warrant
In December of 2011, the IRS published comprehensive new regulations governing capitalization vs. deductible repair expenditures for tangible property. For many taxpayers this will mean making changes to accounting methods and systems, new tax compliance requirements, new tax planning opportunities, and on a positive note, the chance to expense items capitalized as improvements in prior tax years.
Taxpayers can implement method changes in 2012, 2013 or 2014 according to IRS Notice 2012-73. Therefore, taxpayers should incorporate the method changes provided by the new regulations in their tax planning for 2012, 2013 and 2014.
Highlights
Regulations represent a major change that delivers more specification on what is an improvement (capitalize) or a repair (deductible expense)- IRS identified 9 specific building “systems”. Each building system represents a separate unit of property for the purpose of determining if an expense is an improvement or a repair
- HVAC system
- Plumbing system
- Electrical system
- Escalators
- Elevators
- Fire protection & alarm system
- Security system
- Gas distribution system
- Other structural components identified in published guidance
- Using these categories, taxpayers required to review prior year records of repairs expense and capitalized improvements for method changes.
- The building and the new building systems continue to be a single asset for depreciation purposes.
Our CapX Program
Freed Maxick's integrated team of tax and accounting method specialists, and cost segregation engineers can help you comply with these complicated regulations. We’re pleased to bring you FreedMaxick's CapX (Capitalization or Expense) Consulting Service -- a comprehensive program designed to quickly and efficiently bring you into compliance and optimal tax savings. Click here for more information or call Don Warrant at 716-847-2651.
Click here for all the articles in this blog series.
New Tangible Asset Regulations - De minimis rule
What You Need to Know About De Minimis Rules Under the New Capitalization vs. Repair Regulations (Part 2)
Author: Don Warrant
In December of 2011, the IRS published comprehensive new regulations governing capitalization vs. deductible repair expenditures for tangible property. For many taxpayers this will mean making changes to accounting methods and systems, new tax compliance requirements, new tax planning opportunities, and on a positive note, the chance to expense items capitalized as improvements in prior tax years.
Taxpayers can implement method changes in 2012, 2013 or 2014 according to IRS Notice 2012-73. Therefore, taxpayers should incorporate the method changes provided by the new regulations in their tax planning for 2012, 2013 and 2014.
Highlights
- New De Minimis rule allows a deduction for fixed assets if the total amount does not exceed the greater of:
- .1% of federal tax gross for the current tax year, or
- 2% of depreciation/amortization expense on the applicable financial statement for the current tax year
- Requirements:
- The Company must have an applicable financial statement (generally, an audited financial statement)
- The Company must have a written capitalization policy in effect as of the beginning of the tax year
- The Company must follow the policy on its applicable financial statement
- If the ceiling is exceeded, select assets to capitalize
- Can elect to deduct non-incidental materials and supplies under the De Minimis rule
- Treasury has indicated that the final regulations will change the De Minimis rule
Our CapX Program
FreedMaxick's CapX (Capitalization or Expense) Consulting Service is a comprehensive program designed to quickly and efficiently bring you into compliance and optimal tax savings. Click here for more information or call Don Warrant at 716-847-2651.
Click here for all the articles in this blog series.
Capitalization vs. Repair Regulations - Effective Dates
Effective Dates for Compliance with the New Tangible Asset Regulations (Part 1)
Author: Don Warrant
In December of 2011, the IRS published comprehensive new regulations governing capitalization vs. deductible repair expenditures for tangible property. For many taxpayers this will mean making changes to accounting methods and systems, new tax compliance requirements, new tax planning opportunities, and on a positive note, the chance to expense items capitalized as improvements in prior tax years.
Taxpayers can implement method changes in 2012, 2013 or 2014 according to IRS Notice 2012-73. Therefore, taxpayers should incorporate the method changes provided by the new regulations in their tax planning for 2012, 2013 and 2014.
Highlights
- Regulations are effective for tax years beginning on or after January 1, 2012
- Taxpayers must review prior years for method changes
- Method changes are optional 2012 or 2013
- 3 areas that do not require a look back:
- Materials and supplies
- De Minimis rule
- Cost to facilitate acquisition of property
- 2 new Revenue Procedures contain 19 method changes
- New elections and methods for depreciating assets
- New tax planning opportunities with automatic method changes in 2012, 2013 or 2014
- Scope limitations on method changes are waived for 2012, 2013 and 2014
- Examination of repairs will resume after 2014
- IRS expects Form 3115s to be filed during 2012, 2013 or 2014 due to comprehensive changes in rules
Our CapX Program
Freed Maxick's integrated team of tax and accounting method specialists, and cost segregation engineers can help you comply with these complicated regulations. We’re pleased to bring you FreedMaxick's CapX (Capitalization or Expense) Consulting Service -- a comprehensive program designed to quickly and efficiently bring you into compliance and optimal tax savings. Click here for more information or call Don Warrant at 716-847-2651.
Click here for all the articles in this blog series.
New Tangible Asset Regulations - Overview
Overview of the New Capitalization vs. Repair Regulations
Author: Don Warrant
In December of 2011, the IRS published comprehensive new regulations governing capitalization vs. deductible repair expenditures for tangible property. For many taxpayers this will mean making changes to accounting methods and systems, new tax compliance requirements, new tax planning opportunities, and on a positive note, the chance to expense items capitalized as improvements in prior tax years.
Taxpayers can implement method changes in 2012, 2013 or 2014 according to IRS Notice 2012-73. Therefore, taxpayers should incorporate the method changes provided by the new regulations in their tax planning for 2012, 2013 and 2014.
Highlights – why are these regulations important – how do they impact you?
- All businesses must adopt these regulations in 2014
- Capitalization vs. Repair has been a controversial issue for a number of years
- Over 250 pages of new regulations
- Businesses must revisit prior years repairs expense and capitalized amounts for changes
- 19 new method changes could result in multiple method changes for each taxpayer
- IRS examinations of repairs will resume after 2014
- New elections and depreciation methods to consider
- Regs are set up in 4 parts:
- Materials and supplies
- Costs to acquire of produce tangible property
- Costs to improve tangible property
- Dispositions of tangible property
The CapX Program
FreedMaxick's CapX Capitalization or Expense Consulting Service is a comprehensive program designed to quickly and efficiently bring you into compliance and optimal tax savings. Click here for more information or call Don Warrant at 716-847-2651.
The Fiscal Cliff Explained
Changes Looming In 2013
How did we get here? What you need to know? What does it mean?
“Fiscal cliff” is the popular term used to describe the challenge that the U.S. government will face at the end of the year 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.
The end of 2012 will bring significant changes to tax rates for everyone. The provisions of The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), commonly referred to as “the Bush tax cuts” are set to expire along with Payroll Tax Holiday. In addition to the scheduled tax rate increases, the Patient Protection and Affordable Care Act (PPACA) will create two additional taxes on higher income individuals. Further, contribution amounts to Flexible spending accounts (FSAs) have been capped at $2,500 for each employee and the AGI for itemized medical expense deductions has been lifted to 10%.
If Congress does not take any action before the end of 2012, year-end tax planning will present many challenges for taxpayers, especially high net worth individuals. While the full tax picture won’t be clear until closer to year end, business owners and high net worth individuals must begin planning now.
When it comes to taxes, Freed Maxick CPAs is different than most accounting firms in Western New York. To us, tax time is all the time. We’re sticklers about deadlines and compliance, but our larger goal is tax management. So we keep a year-round eye on federal, state and local tax laws, including those pending. We alert you to any changes that may affect you and help you respond in a timely way.
To access helpful TAX PLANNING information, check out Freed Maxick's
2012-2013 Tax Guide, now available online.
You can also access our Year End Tax Planning 2012- A Special Report
CONTACT US for more helpful information and insight.
ABOUT US: Freed Maxick CPAs is Western and Upstate New York’s (NY) largest public accounting firm and a Top 100 firm in the U.S. Freed Maxick provides audit, tax and consulting services to closely-held businesses, public (SEC) companies, not-for-profits and governmental entities in Buffalo, Rochester, Syracuse, Albany and NYC, New York.
Capitalization vs. Repair Regulations – What’s the Good News?
7 Ways the New Regs Might Create Tax Advantages for Tangible Property Owners
Author: Don Warrant, CPA
After years of wrangling over the issue of capitalizing vs deductible repair expenses for owners of tangible property, the IRS issued regulations that are effective for tax years beginning on or after January 1, 2012.
While there are new compliance requirements and complexities (the bad news), there’s also good news for taxpayers that comes in the form of the chance to recover improperly expensed capital improvements from past years.
In fact, there are at least seven ways that taxpayers may be able to benefit from these new regulations:
- De Minimis expensing rule
- Routine maintenance safe harbor
- Deducting retired structural components
- Deducting incidental materials & supplies
- Deducting certain investigation and acquisition costs
- Automatic accounting method changes
- Late general asset account elections
Achieving compliance and securing tax advantage relative to these new regulations is complex and will require the assistance your tax advisor. It’s important to note that there’s only a narrow window of opportunity for meeting new compliance requirements.
If you would like to talk to a FreedMaxick tax expert about your situation, call Don Warrant, CPA at 716.847.2651. Or, click here to learn about our CapX - Capitalization or Expense Consulting Service - a comprehensive program designed to quickly and efficiently bring you into compliance and optimal tax savings.
New IRS Capitalization vs Repair Regulations – What’s in Store for You?
Get prepared for change
Author: Don Warrant, CPA
The IRS published comprehensive new regulations governing capitalization vs deductible repair expenditures for tangible property. For many taxpayers this will mean making changes to accounting methods, tax compliance requirements, and on a positive note, the chance to review prior year records for deductible amounts.
Getting prepared for change begins with understanding what will be changing. You may be impacted in the following areas:
- Costs of acquiring or producing property
- Electing the de minimis rule
- Costs Improving property
- Defining a unit of property
- Improvements to building systems
- Adopting a routine maintenance safe harbor
- Accounting for rotable and temporary spare parts
- Accounting for improvements to leased property
- Disposing of property
- Retiring structural components of buildings
- Electing general asset accounts
- Accounting for materials and supplies
- Accounting method changes
Taxpayers owning tangible property will likely be affected by these new regulations, and there’s only a narrow window of opportunity for meeting new compliance requirements.
If you would like to talk to a FreedMaxick tax expert about your situation, call Don Warrant, CPA at 716.847.2651. Or, click here to learn about our CapX - Capitalization or Expense Consulting Service - a comprehensive program designed to quickly and efficiently bring you into compliance and optimal tax savings.