Tangible Asset Regulations Resources | RKL LLP

Tangible Asset Regulations Resources

Tangible Asset Regulations Resources

If your business acquires, produces or improves tangible property, it’s likely that you’ll be affected by new IRS regulations pertaining to capitalization and deductions for tangible assets, commonly referred to as “TARS.” The regulations will require many taxpayers to file tax accounting method changes for 2014 that may have implications on tax returns and/or fixed asset accounting systems.

The IRS position is that virtually every business or individual taxpayer who conducts a business or owns any tangible business property will need to address their methodology for accounting for tangible assets. Even if no adjustment to taxable income is required, there are new definitions in the regulations that didn’t exist previously that need to be adopted by the taxpayer.  With the issuance of Rev. Proc. 2015-20 on February 13, 2015, many small business taxpayers now have the options of adopting the new rules prospectively using a cut-off methodology or applying them retroactively using a Form 3115.

Filing Form 3115, while sometimes complicated, may be beneficial in many cases for even small business taxpayers because the filing of the form allows favorable adjustments to be taken account in one year, allows taxpayers to make a late partial disposition election, and provides back audit protection in most cases.

For those that choose to file Form 3115, the IRS is allowing taxpayers to make the accounting method change on an “automatic” basis for 2014. The “automatic” designation means:

  1. That taxpayers have up until the due dates of their 2014 tax returns to comply, and
  2. That the IRS user fee typically charged to make such a change of $7,000 will not apply for 2014.

Your RKL service provider is here to help you navigate these new changes and will make recommendations based on your unique circumstances. To gain a better understanding of TARS and how your business may be affected, consult the following resources or contact your RKL service provider.

Final regulations from the U.S. Government via the Federal Register:

Other resources:

Have questions about how TARS will impact your company? Contact your RKL service provider or one of our office locations throughout Central and Eastern PA.