Recent Small Business Related IRS Relief

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Small business taxpayers will be allowed to make certain accounting method changes under the tangible property (or “repair”) regulations without filing Form 3115, Application for Change in Accounting Method, in their first tax year beginning on or after Jan. 1, 2014, the effective date of the repair regulations, the IRS announced on Friday (Rev. Proc. 2015-20). The revenue procedure also allows small businesses to make certain accounting method changes on a cut-off basis, that is, with a Sec. 481(a) adjustment that only takes into account amounts paid or incurred, and dispositions, in tax years after Jan. 1, 2014.

For purposes of the revenue procedure, a small business is defined as one with total assets of less than $10 million on the first day of the tax year for which the accounting method change is effective or average annual gross receipts of $10 million or less for the prior three tax years. The IRS reports that since issuing the final repair regulations it has received numerous requests to make the process of applying the regulations simpler for small businesses and especially to allow them to apply the new rules on a cut-off basis and without filing Form 3115.  

In response to this feedback, the IRS is allowing, for their first tax year that begins on or after Jan. 1, 2014, small business taxpayers that choose to prospectively apply the tangible property regulations to amounts paid or incurred, and dispositions, in tax years beginning on or after Jan. 1, 2014, to make certain tangible property accounting method changes on their federal tax return without including a separate Form 3115 or separate statement. Taxpayers that wish to file Form 3115 may do so, however. 

In addition, currently the de minimis safe harbor under the tangible property regulations for taxpayers without applicable financial statements is currently $500.

In Notice 2015-17, the IRS announced transition relief from the application of the Sec. 4980D excise tax, which applies to health plans that do not meet the market reform requirements of the Patient Protection and Affordable Care Act (PPACA).

The Sec. 4980D excise tax of $100 per day per affected participant applies to health insurance employer payment plans that do not comply with the market reforms imposed on group health plans by PPACA.

Under the relief announced on Wednesday, an employer that is not an applicable large employer because it employs fewer than 50 full-time employees is eligible for relief from assessment of the Sec. 4980D excise tax. This relief applies through 2014 and, for those employers that do not meet the requirements in 2015, through June 30, 2015. This is intended to give small employers additional time to find health insurance coverage that complies with the new law. Eligible employers are also excused from filing Form 8928, Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code.

In the notice, the IRS also addresses the treatment of a 2% S corporation shareholder. In a 2% shareholder-employee health care arrangement, the corporation typically purchases insurance for the shareholder, the premiums are included in the shareholder’s income, and he or she takes a deduction for them. Until further notice and at least until the end or 2015, these 2% shareholder plans will not be required to meet the market reform requirements. S corporations with these arrangements also will not be required to file Form 8928.





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