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A sign I used to have up back in my engineering days (I did materials and failure analysis, among other things): We have not succeeded in answering all of your questions. In fact, the results we have found raise a whole NEW set of questions. In some ways, we are as confused as ever - but we believe we are confused at a Higher Level, and about More Important things.

Well, I've not read millions of pages, but I have heard enough chatter about it that I believe that three people on four boards understand it, and two of them are lying. I'm not even sure I'm doing the election correctly, but don't say anything, I think it'll be ok.

I have a client in GA. Nice guy...PhD is rocket science type of guy. He bought a zero emisssion car (hey...I'm from NYC...we don't have cars here) and he sent me a certificate showing a $5000 GA credit. I did the return....his tax was about $3000...so the credit covered the entire tax liability. Then he asked me about using the $2000 for next year. I looked all over the form. Didn't see anything about carry-overs from last year or to next year. I read the GA booklet...and it didn't say anything about this. I called the GA tax dept....and the rep never heard of this. But...my client insisted that his friend got this carryover. Long story short (after many google searches)....on the GA Environemental page it mentions this carryover. So....after several calls....I finally got connected to "the right person". This credit does indeed carry over for up to 5 years There is no line for it on the tax return. You (the client or preparer) have to keep track.of how much credit is left, until it's used up. The GA Environment Dept. keeps the certificate on file. Weird.... It's one of those things that "how would you know unless you know".

OK - first there are no easy answers to most of the questions and no easy summary. However, being a KISS type of guy, I always, always try to bring things down to their simplest element. MY understanding - none of this applies to COGS. Section 263 deals with capitalizing all kinds of things IF your client fits the criteria to have to abide by those rules. Just a WAG, most of us do not have many clients in that boat. So what is this all about and when is a 3115 required and what is the trigger point. It, according to my understanding, and you all can feel free to correct my understanding, is required when the taxpayer has not been in compliance with the regs as they are stated now going back retroactively to when the proposed regs were issued, or something like that. So if your client should have reported depreciation in one manner but did not, to become compliant, a change in accounting method is required, and consequently, a Form 3115. As I am thinking this through, ALL of my write-up clients, because we make the decisions (with their approval) , have been and continue to be compliant and we will not be filing 3115s for any of those. All of our other clients with depreciable assets will have to be analyzed on an individual basis to determine if the decisions they have made over the years has them in compliance with the regs. The elections that are being talked about are "safe-harbor" elections about prospective activity. By definition, safe-harbor means that if you do what you are suppose to in that harbor, no further questions will be made. By making the elections, your client is stating that he is going to remain in compliance with the rules inside of that harbor. Should he venture outside of the harbor, he does so at his own risk. I know this sounds simplistic, and these rules are anything but simple, but those are the basic rules as I understand them. In the words of one much greater than myself, we have nothing to fear but fear itself. Margaret, I do not think you need to do anything with your present situation. Matter of fact, you may already be guilty of over-kill.

In ATX, I have 68 returns in so far, but I met with and collected 7 more last night, so I am at 75. Last year, with 4 more days to go, I only had 49. So, things have definitely picked up.... Of course, since I bought two other tax practices last year, that would be one of the reasons that there is more of them... However, I do have 18 done, and got a corp done last night. No appointments today. Goal is ten returns... And I am filing elections for most of the clients with fixed assets, and some 3115's. Rich

Much like Margaret, I have read up on the issue and still have more questions than answers. I recognize that I should have taken classes on the topic but I did not. I did buy a CPE course that was provided on this forum in an earlier post on the topic and found it helpful but I still have questions. With that said, can someone provide a brief explanation on exactly when a 3115 is required? I'm sure there are many instances when it is needed but can someone give a general explanation on when the 3115 is necessary? If clients do have a Schedule C or Schedule E and they have Repairs/Maintenance Expenses and also have depreciation expenses and do not file a 3115 (because they believe and their tax preparer believe it is not necessary) does that warrant immediate scrutiny by the IRS? Will they automatically receive some type of IRS notice...or is it as a result of an audit that it would determined that a 3115 should have been filed? And if no 3115 was filed what are the ramifications of that? Just trying to get a better grasp of this and would appreciate any guidance. Thanks very much.

OK - new day, new attitude and clarification. I may have misled when I stated that 75 - 80% of my clients have a 3115 issue. I should have made it more clear that those all need to be analyzed and elections filed. I am NOT filing 3115s for all of them. Some probably, most NO. Still - extra time is needed for the analysis, etc. Enough of that. I completed two returns at home last night - and this is a brand new day. To work, to work. Aaaannndddddd, I whistle while I work, do, do, do, do, do, do, do...................................... Goal for today: 7 completed!

And no #$*$%^&* election? I am extending all returns that have any Schedule C or E until this is all sorted out. Yes, I have taken 2 8 hour classes and read, read, read until my eyes are glazed. But it still baffles me as to the one, true response. I will now go eat some cookies and watch Castle.

I too feel inundated. It seems like just yesterday we were preparing W2s and trying to coerce clients into getting the data needed for the 1099MISCs. Then tax season just fell out of the sky, and the mail and the drop-offs and the appointments just exploded onto the scene. IRS said today that the number of returns already filed is ahead of last year. I don't remember being this busy this early in Feb so they may be right. On the other hand, refund identity theft is on the rise, and those thieves file early to get in before the real person does, so I hope those early statistics don't just reflect an increase in fraudulent returns. I don't think I've ever had 70 returns in my in basket like rfassett does. If I did, I think I'd stop the world and get off--take a vacation or something. In our office we are not filing 3115s for the $200 and $500 elections. They are annual elections, and unless you are filing them retrospectively 3115 is not required. Just elect that treatment and be done with it. Also not needed when clients didn't make a structural improvements to property (and you're not going back to adopt the new regs). If they replaced a roof or HVAC system, that's treated differently under the new regs and you will need 3115 (and an extension if you have 70 returns in your in basket). Can't wait to see how the IRS clarifies this. We've all read millions of pages, gone to hours of courses, and heard the opinions of very smart people at major law and accounting societies. Yet we still aren't sure. Talk about complexity of the tax system.

Am spending twelve to thirteen hours a day anchored to my computer chair and making very little headway. My in box is running over. We aren't eating decent meals (or hardly any meals). They just keep pouring in. Everyone seems to want their refund before "the IRS runs out of money!" The other side of the coin is all the early filers who are owing this year. I am going to take an early night.

Joan, for the property safe harbor first look at the undepreciated cost basis of the building. If that value is less than $1,000,000 then the real property safe harbor is 2% of the building's value, capped at $10,000. Lynn

It's not just me then. I don't have seventy returns in my in box, maybe 10, but I can't get myself motivated, even by my empty bank account. My eyes literally hurt from reading on the computer and it gets to where I can't focus. I did NOTHING yesterday. Well I did go to an AA meeting and then tried to go grocery shopping and to the bank, etc. came out of one store and the heavens opened up. I got drenched walking 10 feet to my car and I was halfway there when the skies opened. Could barely see to drive and gave up on the rest of it. Put in a movie and kept saying I'd get back to the returns. Never did. And I still don't know what to do with the 3115 for the first rental client I'm working on. They replaced the roof. Can I expense? I don't know. And I can't remember what % of basis the safe harbor is! and am sick of looking repair reg stuff up.

I think I'm reading this differently than everyone else. Your client put in windows for a client, which cost him $1978 and the rest was labor. The windows are COGS. (Beginning inventory 0, purchases $1978, ending inventory 0). Supplies are things like nails, caulk, maybe some paint--stuff he keeps on hand that aren't specific to a single job. No election needed.

That's right. Omar Sharif would handle it that way.

Yes, this doesn't help me with the 5/31 that I'm working on that is due next Monday.

From another newsgroup, and also posted in the repair regs pinned thread: This was posted on another list over the weekend. “Good morning everyone, I have some hopeful news. I spoke to someone from the AICPA's Tax Division yesterday and he told me they had a meeting with IRS last Monday about the tangible property regs and the 3115. Nothing certain, but IRS is considering accepting a statement with the return saying that the taxpayer is adopting the new regs instead of having to file a 3115. And, I think more importantly, they may apply the regs prospectively. Presumably, IRS will decide withing 2 weeks whether they'll go this route. So, in his words, "Drag your feet". Wouldn't it have been nice if IRS had made this decision 2 months ago?” Keep your fingers crossed that the IRS will do the right thing!

From another newsgroup: This was posted on another list over the weekend. “Good morning everyone, I have some hopeful news. I spoke to someone from the AICPA's Tax Division yesterday and he told me they had a meeting with IRS last Monday about the tangible property regs and the 3115. Nothing certain, but IRS is considering accepting a statement with the return saying that the taxpayer is adopting the new regs instead of having to file a 3115. And, I think more importantly, they may apply the regs prospectively. Presumably, IRS will decide withing 2 weeks whether they'll go this route. So, in his words, "Drag your feet". Wouldn't it have been nice if IRS had made this decision 2 months ago?” Keep your fingers crossed that the IRS will do the right thing!

Years ago someone stole a bunch of checks from Emmanuel Church and wrote checks to cash and signed them Manny Church. So, now our accounts are in the name of Emmanuel Episcopal Church.

I'm moving at quite a clip AND ACCOMPLISHING ZERO. Thank you all for helping me feel a little better about that.

My completely unfounded opinion is that about 95% of us will be doing that multiple times this year, so you are completely normal. Can you just amend the return and see that he mails the amended return before 4/15/15, or is this a mistake worthy of death and you will be taken out and shot? Cause, they really should rethink that if they have to shoot 95% of us. There is a shortage of ammo, you know.

That's what we're hoping for in a couple weeks, per Catherine's post above. In the meantime, the best inexpensive solution I've found is Lisa Ihm's $20 booklet and free spreadsheet. My copy was PRIOR to 2015-13 and 2015-14. http://brasstax.com/3115%20Booklet.htm

Reminds me of a scholarship credit that was floated here in PA a few years back for Corporate entities making scholarship contributions. S-Corps squawked that they wanted some of the pie too and now we have the Individual Tax department at the State involved. They did not have a clue. I had two S-Corps that got involved. After the first year I told them that if they did that again, they would have someone else doing their work. I spent countless hours on the phone trying to educate the Individual Tax Department. The credit carried over for five years. It was not until the fourth year that any mention of the credit appeared on the PA40. It was an absolute disaster. And I do not know how you fared, but my entire efforts, beyond the prep fee, were gratis. How do you bill the client for the State's ineptness?

Yardley I was going to post the same question. From what I've been reading, I doubt any of my clients need a 3115...because, maybe at most someone paints a room, or fixes the tile on the floor...or depreciates a computer. But...I'm wondering if I'm missing something...and they'll be getting letters. And in addition...why would someone want to change their accounting method? Or is the IRS saying they have to change their accounting method? I'm going to admit...100% ignorance of this topic.

Remember.... YOU did not make the tax law changes. Remind your client what the source of the new regs is. Encourage them to contact their representative and their Senators. YOU DID NOT CAUSE THIS!! And charge more for having to deal with it.

Did they ask Omar for his autograph? That's probably showing my age. Did they ask to take a selfie with Omar?

Ok, this check cashing business I'm working on now took a bunch of bad checks on one "OMAR SHARIFF." I can't even tell you people how normal and brilliant and superb you all are. OMG. I guess they thought they could trust him because of the extra "F" there. Crying.

I'm moving so slowly. Was stuck on one who used the marketplace, but it ended up being Medicaid. Now, am dragging my feet over filling out my first 3115. And, people have been mailing in and UPS and dropping off and mailing and.... My back hurts and my chiropractor closed due to the storm. I'm in slow motion.

Generally, you can deduct the cost of meals and lodging if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. In most cases, you can deduct only 50% of your meal expenses. So, I would say that there is no meal deduction.

I just did a head count and I have 70 returns in house waiting for me to start. And they are coming in at an average pace of 10 -12 per day. So far today, I have finished two. I need to find another gear here somewhere. I am thinking I must be clinically depressed because about 75 - 80% of my returns will have a 3115 issue. Extending is not an option because I sure the heck do not want to be messing with those all summer long. Yeah - clinically depressed - that's my problem. I think I will go dodge some traffic and try to get the mail. Hey! Maybe there will be some more returns in the mail. Hahahahahahahaha!!!!!!!!!!!!!!!!!!!!!

So, forgive my ignorance but I have problems with educating clients about refusing bad checks from Omar Shariff with two Fs, and I just have not studied this. And I really cannot muster up much concern over it, despite the intense anxiety of some on other boards. The "Election to Apply De Minimis Safe Harbor to Expense Cost of Acquired Property" means if I goof and call an asset "supplies" instead of listing it as an asset (and using Section 179, which is what I always do, hello); I will not be taken out and shot if the item costs less than $200. Or $500. And that one election covers both amounts? So how do I know which one I elected? Ron: We were posting at the same time - I'm not ignoring you.

Lion - I appreciate your insight. But as to the hefty user fee - that is one of the scare tactics being floated around. Agreed, this is A year where there will be no fee for the scope involved; however, there is no guarantee that the fee will be imposed next year. Q. I have heard about a $7,000 user fee. What is that? A. The $7,000 user fee applies to a taxpayer seeking non-automatic consent for an accounting method change. The 3115’s required to comply with the TPRs generally receive automatic consent without a user fee, BUT after 2014 there will be cases where an automatic method change may not be available because of “scope limitations.” Through 2014, the IRS has waived all normal scope limitations to accommodate compliance with the TPRs. For example, one scope limitation allows for only one accounting method change every five years. In another case, scope limitations limit certain taxpayers with Section 263A (self-constructed assets) method changes to non-automatic consent. Through 2014, all taxpayers will be given automatic consent in spite of these limitations. After 2014, these scope limitations will again be applicable, and changing method of accounting may require a $7,000 fee. So if my client has not requested a change of accounting methods in the last five years, and needs to make one next year, assuming all other scope issues are met, the user fee would not apply. At least that is my reading. And by the same token, the thought just occurred to me, if I rush to file unnecessary 3115s this year, what happens next year or the next when my client needs to make a real change in accounting methods. Am I subjecting him to that $7,000 user fee because we filed a 3115 in 2014 and he is filing one again within the five year scope limitation? I don't know the answer to that. But I think it needs to be considered. Margaret - this will teach you to forget to attach an election. Look at the can of worms you have opened.

Sorry for the confusion Margaret. I know you had no 3115 issue. I should have used that quote thingie because my response was mostly to another post or two on this thread. The tag I hung on my post about you stands. I do not think you even need to be concerned with the election. To the extent that your guy basically uses up most all of his "supplies" on a per job basis, those are just cost of goods sold and he falls way, way below the criteria that would throw him into the 263A unicap rules. I just do not see a need to file the election. My point is, I think you are fine without it. That said, there is no harm in filing it, I guess. But I would not lose any sleep over missing the filing of this one.

That's nuts!

rfassett...thanks to you and everyone who have chimed in with their guidance (and maybe others will continue to post on this topic as well, that would be great.) Based on these explanations, I think its fair to say, we may all have clients with Schedule C's and Schedule E's and Asset Depreciation that we need to analyze but in the end, a 3115 or any type of safe harbor election may not be required. As long as we all do our due diligence and try to ensure, to the best of our knowledge, that assets, depreciation method selections and repair and maintenance expenses were handled correctly. If we feel somewhat assured that they were, then form 3115 will not be filed as part of the return. I know that may be a simplistic approach and I'm not suggesting we shouldn't continue to stay informed on the topic, because obviously we should...but we shouldn't go crazy over it either.

I couldn't begin to tell you what the changes are that need to be made or how to apply for the changes.

I am 24 of 341 CPA's within 5 miles. I don't know how this works, but I guess I must be OK for being this small.

COGS and supplies. No depreciation needed. No 3115 needed. He does not need to keep inventory, just the copies of the invoices where he purchased the windows.

Okay, materials, not supplies. Technically, yes, cogs but he doesn't keep inventory and at his level of business, I don't get all the niceties that one would hope. He had income of $4450 for a couple of odd jobs one of which was installing some windows. The total cost of the windows was not $1978. Frankly, I didn't ask him to segregate and itemize every expenditure as he lumps it all into supplies. And they would be cogs materials and supplies anyway. Are these not subject to the same criteria? It would be ideal to treat all clients exactly the same whether $445,000 in income or 1/100th that amount. I'm lucky to get what I get as it is. Real world, but I believe he is honest and the bottom line comes out the same. It has been my understanding anyway that materials and supplies are, well, materials and supplies. Guess not. Alas, retirement looms very large in my horizon and, like some others here, I will now go whimper. I tried to get rid of all business clients a few years ago. Time to shed them all, methinks.

In WI, only retirement benefits based on qualified membership which began before January 1964 MAY BE SUBTRACTED. Any portion of benefits received that are based on membership in other nonqualifying retirement systems or based on employment which began after December 31, 1963, is taxable and may not be subtracted from Federal income. I only have one retired WI teacher who qualifies for the deduction. So, it would depend on when your teacher started teaching and when he/she retired. If the teacher is newly retired, 30 years would NOT qualify.

So it's your contention that if no one will EVER look then it's ok to miss an election, or to not file, or to file incorrectly, and that's how you advise your clients as an enrolled agent? Nice! /s The OP now has the correct answer. He can now decide how to properly advise his client.

I'm really pushing extensions, as you say, for Forms 3115. And, also, to see what direction the IRS will really go with this. But, I'm getting a lot of pushback and refusals for filing extensions.

Well, I think I will just mail it and hope for the best throwing myself on the mercy of the agency. I'm sure not to be alone.

Client gave me a separate stack of receipts for business meals where she took clients out to lunch...I will give her 50% of these...just not the meals for herself since she did not stay overnight.

You are actually way above average, but I'm not trying to make you a bigger target. Yes. Yes, they will.

Because the funds came from an account solely in the wife's name, technically she gave the entire gift and she is electing to split the gift with her husband, so she needs to file a 709 and check the box electing the split for that to be valid. Husband must sign her 709 in the designated area for the split to be valid. If the the husband made no other gifts, there is an exception that allows him to not have to file a 709 as noted in the instructions, so only the wife needs to file. Wife would check "no" on line 17, and the husband must sign on line 18 of page 1 of the wife's form 709: Consent of Spouse Your spouse must sign the consent for your gift-splitting election to be valid. The consent may generally be signed at any time after the end of the calendar year. However, there are two exceptions. The consent may not be signed after April 15 following the end of the year in which the gift was made. But, if neither you nor your spouse has filed a gift tax return for the year on or before that date, the consent must be made on the first gift tax return for the year filed by either of you. The consent may not be signed after a notice of deficiency for the gift tax for the year has been sent to either you or your spouse. The executor for a deceased spouse or the guardian for a legally incompetent spouse may sign the consent. When the Consenting Spouse Must Also File a Gift Tax Return In general, if you and your spouse elect gift splitting, then both spouses must file his or her own, individual, gift tax return. However, only one spouse must file a return if the requirements of either of the exceptions below are met. In these exceptions, gifts means transfers (or parts of transfers) that do not qualify for the political organization, educational, or medical exclusions. Exception 1. During the calendar year: Only one spouse made any gifts, The total value of these gifts to each third-party donee does not exceed $28,000, and All of the gifts were of present interests. Exception 2. During the calendar year: Only one spouse (the donor spouse) made gifts of more than $14,000 but not more than $28,000 to any third-party donee, The only gifts made by the other spouse (the consenting spouse) were gifts of not more than $14,000 to third-party donees other than those to whom the donor spouse made gifts, and All of the gifts by both spouses were of present interests. If either of the above exceptions is met, only the donor spouse must file a return and the consenting spouse signifies consent on that return

What Lynn said...I have never had a problem e-filing any...and unfortuantely, have had quite a few.

If they each gave the sister $7,500 as a gift, neither of them reached the limit to require reporting the gift unless there are other gifts during the year that you did not mention. i don't think a 709 would be required under these circumstances.

Second thought, it's not uncommon for the annual depreciation limits to result in the depreciation of a vehicle for some years beyond its MACRS life.

The personal use % could have changed every year. Unless you can look at each year's tax depreciation schedule, the only thing you can do is assume that the remaining undepreciated balance is due to the accumulation of personal usage.

I am not sure that just making an election takes care of the problem. From what I am reading you NEED to do a 3115 for every C, F and E just to protect yourself. I see 3115 as a no win situation.....I think all of us should be putting post up on every board for preparers and taxpayers to be contacting their congressmen to put a stop to this insane rule. Are you trying to explain this to your client that hardly knows what the difference between an expense or a capital improvement. With rules like this you are hardly encouraging people to go into business. I for one do not want to be slapped with a $500 penalty and if you don't do the 3115 or do itcorrectly it could be multiple penalties! I can see regulations for guidelines for repairs and capitalization but this is CRAZY!