Happy Thanksgiving from all of us at PassKey EA Review and PassKey Learning Systems. We appreciate all your support over the years and we're thankful for all our clients and customers. Have a happy holiday everyone!
Woo hoo! The IRS listened to tax pros!
After overwhelming response from the public, the IRS is increasing the safe harbor limit for expensing certain items. The limit is increasing from $500 to $2,500, starting in tax year 2016. (Notice 2015-82). It's not retroactive, though, so the limit has increased going forward.
As for expensing large items (like a $2,400 mower for a landscaping client, for example), it's my opinion, that it's still better for the client, in terms of lowering audit risk, to Section 179 this type of purchase and put it on the depreciation line rather than the "supplies" line, other "other expense".
Also, it's also a more correct tax treatment to depreciate an asset, and I don't see the benefit of expensing this type of equipment unless there's a going concern issue and you have the possibility of Section 179 recapture in the near future.
With smaller business clients (such as small Schedule C taxpayers), it depends on the type of asset, but I don't think it's a lot of extra work to depreciate a $500 computer or something similar. The asset does have a useful life exceeding one year, after all. If it's something small like a cheap $150 printer, then I usually expense it.
As tax professionals, we have to use our own reasonable judgement, and that varies based on the size of the business. Obviously a $500 purchase is going to be material for a business that only has $5.000 in gross revenues, but it probably not be material for a business that grosses $500,000. Materiality is always a factor and we should take that into account first.
That being said, I'm very pleased that the IRS decided to increase this safe harbor threshold.
We've finally set up an official mailing list for free CPE! If you would like to join, just sign up here:http://www.passkeypublications.com/contact.html. We will send out free CPE alerts at least once a month.
FREE CPE ALERT! For those of you who have already passed your EA exams, here's a free CPE alert!
EITC Due Diligence Course
Tuesday, December 08, 2015
11:00 AM Pacific Time
Earn one hour of Federal Tax Continuing Education Credit.
Presenters and Q & A Participants:
Mary O’Brien, Manager, EITC and Other Refundable Credits Office
Jan Ribolla, Senior Analyst, EITC and Other Refundable Credits Policy and Coordination Office
Moderator: Christine Footit, Senior Stakeholder Liaison
In IRS News: IRS Funding is a Top Priority for the new AICPA Chair
Has anyone tried calling the IRS lately? Try waiting on hold for two hours only to get disconnected because they simply don't have enough operators. Sending a response to a notice? Be prepared to wait 6 months for a response. Something has to be done!
“The IRS does not have enough money to function,” said Mattson, tax partner in the Silicon Valley office of Moss Adams. “It affects our ability as CPAs to do our job."
Congratulations to Stephen Woodward, who just passed the EA exam on his first attempt! Here's a wonderful message from Stephen:
"PassKey was the only study aid that I used and the guides were an invaluable resource. They were concise and covered the subject matter succinctly with spot on end of chapter questions that were very similar to what I encountered on the exams. The video instruction series was exactly what I needed to gain the confidence going into each exam. The instructor on the video knows the Enrolled Agent exam topics very thoroughly and was able to explain them in such a way that even someone like myself, with no previous accounting or tax preparer background, could understand the information. She highlighted the important sections and indicated areas that had been tested on previous exams. The video lecturer series was the part of my test preparation that I went back to on multiple occasions in order to supplement my reading and get a better grasp of the tougher topics.
Thank you for helping me achieve this personal goal of mine. Now I begin the process of finding a tax preparer position in my local area.
Stephen J Woodard CFP, CLU, ChFC
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