De Minimis Rule Change Is Better than I First Thought

My flight home last night was delayed, so I got the chance to read the IRS’s new de minimis rule for small businesses allowing expensing of items costing $2,500 or less. Normally when you read something that’s from the IRS, you expect to find “gotchas.”

Instead, I found good news for taxpayers. While the rule explicitly applies to tax years beginning after December 31, 2015, the IRS states,

AUDIT PROTECTION

For taxable years beginning before January 1, 2016, the IRS will not raise upon examination the issue of whether a taxpayer without an AFS can utilize the de minimis safe harbor provided in § 1.263(a)-1(f)(1)(ii) for an amount not to exceed $2,500 per invoice (or per item as substantiated by invoice) if the taxpayer otherwise satisfies the requirements of § 1.263(a)-1(f)(1)(ii). Moreover, if the taxpayer’s use of the de minimis safe harbor provided in § 1.263(a)-1(f)(1)(ii) is an issue under consideration in examination, appeals, or before the U.S. Tax Court in a taxable year that begins after December 31, 2011, and ends before January 1, 2016, the issue relates to the qualification under the safe harbor of an amount (or amounts) that does not exceed $2,500 per invoice (or per item as substantiated by invoice), and the taxpayer otherwise satisfies the requirements of § 1.263(a)-1(f)(1)(ii), then the IRS will not further pursue the issue.

This means that the new de minimis rule is really effective now, and it may make sense for some taxpayers who qualify for the de minimis rule to amend one or more prior year returns. It is the Holiday Season, and here the IRS was in the spirit of giving and wasn’t the Grinch.

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2 Responses to “De Minimis Rule Change Is Better than I First Thought”

  1. […] The IRS today announced that the de minimis expense threshhold for small taxpayers (which is the vast majority of all taxpayers) to $2,500 from $500 for tax years 2016 onward. Note that this does not apply for 2015 returns filed in 2016. This move will allow taxpayers to expense many items that currently must be depreciated. [Update: While the rules apply for 2016 returns, the IRS says they will not examine (audit) taxpayers who use the new $2,500 de minimis rule on open tax years. Thus, the rule effectively applies for 2012 returns onward. See this update.] […]

  2. […] Fox, De Minimis Rule Change Is Better than I First Thought. “Normally when you read something that’s from the IRS, you expect to find […]

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