Take Advantage of Extended Filing Window for TPR Amended Returns September 15th has come and gone and left some disappointed taxpayers in its wake. Form 3115, the Application for a Change in Accounting Method, is required to take full advantage of the opportunity to reclassify assets under the new Tangible Property Regulations. Many taxpayers have been under the erroneous impression that corporate and partnership returns on extension were due September 15th, with or without the all-important Form 3115. However, if you were unable to submit your Form 3115 under the wire, take heart – the IRS has good news for you. Under Sec. 301.9100-2(b) of the Code of Federal Regulations, you actually have six months from the original due date of your return, making the deadline October 15, not September 15.

What to Do

To take advantage of the extended filing window, there are several things you need to do. Ideally, you’ll have filed your 2014 tax return by the original September 15 deadline even if you didn’t include Form 3115 or the associated 481 (a) adjustment, reflecting the cumulative impact of the change on taxable income.
Assuming your return has already been submitted, complete Form 3115 and any TPR documentation, if needed. Label all paperwork “Filed Pursuant to Administrative Relief Procedures of 301.9100-2(b),” to ensure that you qualify for the extended October 15th deadline. If you have already filed Form 3115 and are submitting an amended version, be sure to note this by writing “superseding” on the top of the amended version. These forms must be submitted directly to the Ogden, Utah location of the IRS.

At this point, you can submit your partnership’s amended tax return for 2014. Include copies of Form 3115 with the new return, as well as your 481(a) adjustments and any other TPR documentation. Please note that one copy of the documentation must be filed with your amended return and a second copy submitted to the Ogden office.

The Importance of Form 3115

Under the Rev. Proc. 2015-20, not every business is required to file Form 3115. However, doing so is often in a company’s best interest, as it confers tremendous opportunity for benefit. Form 3115 provides the opportunity to deduct expenses previously capitalized if they are classified as deductible repairs under the new regulations. It also allows companies to reclassify assets previously deducted as repairs that are in fact considered to be improvements under the new regulations. These assets can then be correctly capitalized and the regulations then allow for capture of the past depreciation. Form 3115 also allows for the immediate deduction of legacy assets no longer in service through partial asset disposition. Passing on Form 3115 means passing up a great deal of opportunity, and if assets were reclassified as described without the submission of a Change in Accounting Method, a resulting audit would not be a pretty picture. Filing Form 3115 for tax year 2014, and not waiting until later tax years may save a business a hefty fee. Finally, permission to change accounting method has been guaranteed by the IRS for 2014, but there is no such guarantee for future tax years at this point.

The idea of completing a detailed eight page tax form, or several versions of a detailed eight page tax form, can be daunting. The long-term benefits may well outweigh the short-term effort though. As October 15 approaches, consider partnering with the Capstan team to make the most of this opportunity while it lasts. To find out more about the requirements for Form 3115 and how we can help, contact us today.