You Don't Need to File Those Form 3115s After All

Published on: 12:56PM Feb 16, 2015

The IRS had issued new Regulations more than a year ago dealing with repairs, materials and supplies and related capitalization of asset purchases. In my opinion the new Regulations were actually fairly taxpayer friendly, however, there was much discussion by many firms that all taxpayers would be required to file a Form 3115 (a form to let the IRS know about changes in accounting methods, etc.) for all farmers and other business. Our firm did not feel this was necessary since most farmers were already following the tax laws.

We had heard about some smaller CPA firms filing 100s of these forms during 2014 with the IRS office in Ogden, Utah. The IRS (finally) issued Revenue Procedure 2015-20 last week that eliminates the need to file this Form 3115 in almost all cases for our farmers. If your average gross receipts for your business is less than $10 million (over the last three years) OR your assets at the beginning of the taxable year are less than $10 million then you are not required to file a Form 3115 due to these Regulations in almost all situations. This is very good news.

I think part of the reason why the IRS issued this procedure is that they barely have enough funds to answer the phone, much less deal with millions of Form 3115 that really serve no purpose. This does not generate any extra tax revenue for the IRS and in fact costs them a lot of time and effort to process the forms.

Also, the IRS is requesting comments on whether they should increase the de minimis amount up from the current $500 level to a higher amount. The de minimis amount allows farmers and other businesses to expense any purchased item costing less than that amount immediately without having to put the cost on a depreciation schedule or keep track of. Simply based on the fact the IRS is actually requesting comments leads me to believe they will increase the amount, however, it will likely not be in effect for any tax returns filed by April 15. The IRS will probably provide this on a prospective basis since it is an annual election.

Roger McEowen at the Center for Agricultural Law and Taxation and myself will be presenting a webinar this Wednesday, February 18 at 10 am CST on these Regulations and how to implement them in your operation. Available slots are limited, however, if you are interested in this webinar, please click here for the signup.