Question for those currently in public accounting

Loading up on bullets. It's awful.

We purchased a turnkey solution from a CPA firm in the northeast. I'm not sure if I'm allowed to post the name of the company on here (don't want to be accused of advertising). It basically contains tons of resources, training videos, templates, client letters, etc. It's been very helpful for us.

Last year we started preparing our clients for the changes. Then, last month, we did a client mailing that explained in brief the changes, and contained some sample capitalization policies. We are requiring each client that has fixed assets to have a written capitalization policy this year. We also explained in the letter that compliance fees will increase, due to the 3115s and the required adjustments, but, we are hopeful that the adjustments will allow us to write off some previously capitalized items, as well as expense more each year. Thus, maybe, we can save them more in tax than the increased compliance costs.

Starting last month, we have had our clients, when they are otherwise not chargeable, start looking at depreciation schedules for what we need to do for each client, and start filling out Form 3115s. We intend for many clients to have the 3115 filled out before we work on the tax return - because they require a separate signature.

Now, as we are about to start to start getting some 3115s signed and filed, last Friday, IRS issued new guidance on how to file the forms. The guy who we bought the toolkit from advised us to stop preparing the 3115s as he believes THE IRS WILL REDO THE FORM very shortly.

We are increasing our processing fee for each client that has fixed assets, and of course, filing out the forms and making the adjustments will result in additional hourly costs.

Between this and ACA, we are expecting record billable hours this tax season. =)

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There is no way the IRS can possibly process the required volume of 3115s much less examine returns for all of the possible changes in accounting methods

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its almost seems like this was purely a political move to get their budget upped. Thinking the majority of these forms end up in a dumpster

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The IRS agents I have spoken with expect the forms to go straight to files without any review.

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Yeah, I don't know of a single IRS field agent that is actually happy about these forms.

I do wonder why the IRS could not have either simplified the process, or, just made a blanket waiver for everyone. I'm sure they have the rule making authority to do that.

I've been telling people that only the federal government could REQUIRE you to make a change in how you calculate something, and tell you that you have to ask for PERMISSION to make that change. Even thought the permission is automatic, it's completely insane to go through that exercise.

only concern with not doing a 3115 is when I came upon this....

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Q. I can’t really afford an extra tax return fee this year. What if I don’t file a Form 3115?

A.The IRS has stated they will wait until all 2014 returns have been filed before auditing these TPR issues [LB&I-04-0313-001], and then scrutinize returns that did not include a Form 3115 with their 2014 tax return. Generally, it is presumed that essentially every business with material and supplies or depreciation has been using an incorrect method of accounting, because the final regulations adopted some new guidance contrary to “how it was always done before.” Chances of a tax return audit increase significantly if a Form 3115 is not filed.

In addition, if your tax preparer signs your return without your compliance of the regulations, they may be at risk of penalty and disbarment (Reg §§ 10.50 & 10.51) for violating their professional standards (Circular 230) by having knowledge of your noncompliance (Reg §10.21) yet still signing your tax return in reckless disregard of the regulations (Reg §10.34).

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Likely bullshite scare tactics....but still....

Any tax savings is just a timing issue while the costs to determine the 481(a) adjustment and file the 3115 are actual cash expenses. The favorable 481(a) adjustments would have to be pretty significant to be economically beneficial to the client. I explain the situation to clients and let them decide whether to file the 3115, which I view as seeking permission, or not file the 3115 which might result in the need to ask for forgiveness.

For most of my clients with residential rental properties the expenses that would be reclassified as repairs just wouldn't be that material. Most of the recent material repairs were of damages caused by Hurricane Gustav, and those were deducted as casualty losses from a declared disaster.

Was actually in a meeting with some of our younger staff discussing some repair regs issues we have been seeing, when this thing dropped. Got back to my office and had like 6 missed calls and about a dozen e-mails from other CPAs I know.

I do believe this was a last minute thing, as the rev proc is horribly written and hard to follow.

Interesting discussion fellas.

I wasn't even aware of this new form/requirement so I learned something on it and the practicality of it.

I'm pretty much entirely international now and have my own nightmare called FACTA to play with.

Can Gil answer my question?