I am sending this email to you because the IRS has issued new regulations regarding fixed assets.

You should read this if your business owns any of the following:

 - Autos or Trucks
 - Computers/cell phones
 - Software
 - Office furniture
 - Rental properties
 - Office Equipment

These are all considered fixed assets and new regulations apply. In golf you play the ball as it lies unless there is a rule that says differently. If you purchase any fixed asset, the rule is you must capitalize all assets for any price unless you have a rule that is different.

So if you go to Staples and purchase a stapler for $50 you would need to capitalize that and not expense it unless you can find a rule that states otherwise.

Another example could be: maintenance on an auto is expensed unless it prolongs the life of a car like tires or a rebuilt engine. So you now begin to see the traps.

Rules you may want to use:

1) All purchases under $200 and an economic life under 12 months can be expensed.
 

2) If you have a company that does not prepare an annual applicable financial statement (audited financial statement) you can have a written policy in your board meeting minutes, raising the amount to $500. This must be elected annually.
 

3) If you have an annual applicable financial statement you can raise the amount to $5,000, elected annually.
 

4) If you make election 2 or 3 you must file a Form 3115, application for change in accounting method, to your tax return which will result in extra time in preparing the tax return.

To assist you we have linked to a sample policy board action and a PDF copy of the current Journal of Accountancy article regarding these new mandatory rules. THE NEW COMPANY POLICY MUST BE DATED JANUARY 1, 2014. THIS DECISION AND ACTION SHOULD BE DONE NOW!

If you do nothing your company will be capitalizing all supplies over $200. So if you do not send us a copy of your new policy we will consider your company under section 1 above. So all assets over $200 must appear on your balance sheet.

As in all new regulations it will take a while to see how they are implemented. This is the first blast so you can get your house in order for 2014. When I see changes to these rules as they are implemented I will email you with new information.

If you have any questions please feel free to call me here at the office.

Of course with something this new donít expect us to have all the answers. Thank you.
 

Monica
 

 

Monica Rebella, CPA/IAR
Rebella
Accountancy
507 E. First Street #A
Tustin,CA 92780
ph (714) 619-0667
Fax (714) 544-0236
email: mrebella@rebellacpa.com



This document was not intended or written to be used, and it cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties.

 

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