Are you aware that the IRS did a major overhaul in regards to determining repair versus improvements?
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Since there were a lot of changes, I will just talk about one specific topic for now and the rest will be in my next video blogs. Okay? So, last November 2015, the IRS issued a notice increasing the amount of repair that you can expense out from $500 to $2,500 for tax years beginning 2016.
That is great news! However, I recommend that you have an accounting capitalization policy in place to document the $2,500 that you will expense out. This accounting policy needs to be in place at the beginning of every tax year.
Why am I telling you all of this? Because, in case you get audited, the IRS auditor will be reviewing their 220-page (yes, 220 pages!) repair audit tax guide and will be looking for your policy to determine the following:
• Was it in writing
• Was it in effect beginning of the year
• Was the policy changed to reflect the expense amount from $500 to $2,500
To recap, make sure you have the accounting policy in place to audit-proof the expense items that you are claiming.
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Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.