Repair Regs – A Hellish Tax Season And Refunds Of Biblical Magnitude

You may have read that we are in for a tough tax season what with delays because of Congress not getting around to the extenders and IRS budget cuts. Well. Thats not all. Tangible property is of course stuff like automobiles and computers and buildings all sorts of stuff.

Outside of fairly specialized areas like equipment leasing , the biggest impact of the regulations is in the area of buildings both for landlords and tenants who have made improvements. There are some businesses that dont involve being either a landlord or a tenant in a building but not a very high percentage. Buildings are what may be yielding the refunds of biblical proportions that I discussed with Michael Greenwald of Friedman LLP. Friedman LLP is located at 1700 Broadway in Manhattan surrounded by some of the big buildings that may be yielding big refunds thanks to the new regulations. But what about the hellish part, you may ask?

Remember The AT&T Breakup?

In 1984 the Bell System, which was something of a monopoly of telephone service was broken up by a divestiture of AT&T. When a company divests it distributes stock in companies that it owns. It can be a tax-free transaction which requires disclosure by shareholders and an allocation of basis among the various assets. Well, everybody owned stock in AT&T and typically they had acquired it over a period of years. So just about everybody had a complicated return that year. The phase-in of the passive activity loss rules after the Tax Reform Act of 1986 was a similar horror show. These regulations promise a similar flurry.

Have you ever heard of Form 3115? Go ahead and take a look at the eight page form, thats why I gave you a link. Now take a look at the twenty pages of instructions. Scroll to the very end where there is an estimate of the burden that the form puts on the taxpayers as required by the Paperwork Reduction Act.

Check out what Christian Wood wrote in the Journal of Accountancy.

With the new regulations effective for tax years beginning on or after Jan. 1, 2014, For example, taxpayers will need to file a Form 3115 to adopt the materials-and-supplies provision or file an election statement to use the de minimis rules. Failure to include the Form 3115 or election statement may indicate either an unauthorized accounting method change (one that did not obtain the IRSs required consent) or the taxpayers noncompliance with the final regulations.

Now I have read the repair regulations a few times without that dawning on me. That JOA article was back in February, but I have peculiar reading habits for a tax practitioner. I try to look at all the original source material to find interesting stories for my blog, so I got my wake-up call about just about everybody who is not a pure W-2 working stiff having to file Form 3115 at the Wolter Kluwer User Conference in Orlando.

The instructor indicated that if we did not join in with other practitioners in launching a tsunami of accounting method change forms on the IRS, dire consequences awaited us and out clients. Now any conference that includes a trip to Universal Studios for two haunted house experience one based on aliens and the other based on the movie Dracula and an inspirational speech by someone from a reality TV show

deserves a bit of skepticism.

Link:
Repair Regs - A Hellish Tax Season And Refunds Of Biblical Magnitude