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Reese Henry & Co

New and Final IRS Regulations

As the new year has begun, we would like to remind and make you aware of new and final IRS regulations regarding business repairs and maintenance. These regulations are related to when items should be expensed and when costs need to be capitalized. The rules are extremely in-depth and apply to nearly every business. After reading the information below, please do not hesitate to contact us with any questions or concerns you may have.

New Capitalization of Asset Rules

The new regulations provide that a business must capitalize all asset purchases greater than $500 for the year 2014. Thus, any purchases of tangible assets with a life of greater than 12 months must be capitalized and depreciated by all businesses. The new regulations provide that this capitalization amount is reduced to $200 per item unless business has:

  1. A written accounting policy (in place at the beginning of 2014) to expense the amount paid for a tangible asset if the amount is under $500 per item/invoice or any amounts paid for tangible property with an economic useful life of 12 months or less, and
  2. Accounted for the amount paid for the property as an expense on its books and records in accordance with those written accounting policies.
Based on the above discussion of the new IRS regulations regarding business capitalization policies, it is our assumption that you have adopted the following asset capitalization policy:
"The business will capitalize all tangible assets with a cost greater than $500 per item, or any tangible asset with an economic useful life of more than 12 months."
If this is not accurate, or you plan on using different procedures, please contact us immediately to inform us of the procedures you will be using.

As previously noted, these final regulations are extensive and apply to nearly every business. The rules regarding repairs and maintenance and the need to expense or capitalize costs are potentially very significant. It is important that you utilize all positive aspects of the new law. As a reminder, if our assumption above is not accurate, please contact us regarding the practices you will utilize. If you have any questions or concerns regarding these new laws, please contact us at your convenience and we will assist in any way possible.

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Reese Henry & Company
Phone: 970.925.3771  |  Email:
Aspen Office: 400 East main Street Aspen, CO 81611
Carbondale Office: 0326 Hwy. 133, Suite 200 Carbondale, CO 81623

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