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Tangible Property Regulations (TPRs)

Newly released IRS regulations offer businesses the opportunity to reduce their taxes on the 2014 tax return.

The Final Tangible Property Regulations (“Repair Regulations”) are effective for tax years beginning on or after January 1, 2014. There are many favorable methods and safe harbors in these regulations that taxpayers may want to adopt this year. Certainly you have an accounting firm preparing your tax returns and auditing your financials. But if your accountants have not identified or discussed with you the tax savings regarding the adoption of these regulations, you will likely miss out on a tax savings opportunity this year.

Ashland is not an accounting firm. Rather, we are a highly focused tax consulting firm that specializes in very specific tax issues that reduce federal and state tax liabilities. We know these issues because of the years we have spent as senior revenue agents, managers, and directors at the IRS.

These regulations are highly taxpayer-favorable. Our federal consultants will need only a few minutes to explain how these regulations will affect your business and how we can help. Please remember that what we do will not affect your relationship with your accounting firm, but will complement the service they provide you.

Background

On September 13, 2013 the IRS has released the final “repair regulations” governing when taxpayers must capitalize and when they can deduct their expenses for acquiring, maintaining, repairing, and replacing tangible property. The final regulations are more taxpayer-favorable than the temporary regulations. However, they still require a significant investment in time and talent to assure compliance.

Every business with at least some fixed assets. That is, virtually every business must comply with these new rules for its first tax year beginning on or after January 1, 2014. Also, the IRS chose not to finalize companion regulations governing general asset accounts and the disposition of depreciable property under Code Sec. 168. Instead, it issued proposed regulations that make significant changes within this highly controversial area.

The final regulations must be applied for taxable years beginning on or after Jan. 1, 2014.

What You Should Be Doing Now

  • Identify issues you need to consider as a result of the Tangible Property Regulations.
  • Identify and categorize depreciation schedule items that need correction. There may be many.
  • Make decisions on whether to employ the temporary, proposed, or final TPRs and for which method changes.
  • Plan any internal processes that must be implemented before 2014 (de minimis, M&S, and others).
  • Gathering data needed to prepare Forms 3115 for filing with 2013 returns.
  • Identify building components and other tangible property that have been disposed of.
  • Determine which Forms 3115 must be filed in future years (no later than tax year 2014).

How Ashand Can Help

Ashland’s former senior IRS auditors will perform a preliminary analysis that will tell you:

  • Which of the changes apply to you
  • How these changes will impact your financial statements and tax payments

Don’t wait until you are out of compliance to do this, putting your company at added audit risk. There may be significant tax savings or even refunds available to you now, which would go directly to your company’s bottom line.