The IRS has recently written on their website that eligible taxpayers may elect out of Rev. Proc. 2015-20 by filing a statement with their 2014 tax returns indicating their qualifying trade or business is not applying the simplified procedure of Rev. Proc. 2015-20. Qualified small business taxpayers who accept the relief of Rev. Proc. 2015-20 automatically forfeit any opportunity to retroactively correct capitalized expenditures that should have been deducted in years prior to 2014.

A qualified "small business taxpayer" for this purpose is any business with total assets of less than $10 million or less than $10 million in average annual gross receipts (from prior three taxable years).

Since this would be a regulatory election, taxpayers who have already filed their 2014 returns can use the §9100 late filing relief provisions to file this statement with an amended return. For calendar year taxpayers, this amended return would be due by September 15, 2015 for C corps and S corps and October 15, 2015 for partnerships and individuals. Alternatively, taxpayers can file their 2014 returns with a Form 3115 for a method otherwise within the scope of Rev. Proc. 2015-20 to elect out of Rev. Proc. 2015-20 as KBKG suggested in our prior article. The §9100 late filing relief rules are also available to file a Form 3115 with an amended 2014 tax return.

In order to reserve the right to retroactively claim Tangible Property Repair Regulation deductions, consider amending 2014 returns with an affirmative statement electing out of Rev. Proc. 2015-20. Any missed repair or removal deductions can be claimed on 2015 tax returns by filing a Form 3115 with corresponding documentation

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Author: Susan Jacobson | Co-author: Gian Pazzia, CCSP