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IRS Form 3115 Sin and Travesty

February 5, 2015

IRS regulations are requiring every business with materials, supplies, equipment and real estate to change their accounting method and file an eight page Form 3115 with their tax return and to mail a copy of the form to an IRS group in Ogden, Utah.  This is a sin and a travesty.

Form 3115 is used to adopt a change in accounting method and, in this case, the change gets an automatic approved acceptance by the IRS so no oversight or permission is needed.  The change is necessitated by the IRS making it more restrictive to get current tax deductions for materials and supplies that are not used in the year purchased and certain changes to how repairs and similar items were previously deducted.  We are not questioning the IRS changes.  We are appalled by the required method to report the adoption of the changes to the IRS.

The instructions to Form 3115 are 20 pages long and provide estimated times to keep records, learn about the law or the form and to prepare and send the form to the IRS.  The total time is estimated at 82 hours!!!  Now, not everyone will have to fill out every schedule but even a quarter of this time is over a half week of work time.  Even a tenth of this estimated time is over a day’s work.

The forms have to be attached or included with the tax return and also mailed to Ogden Utah. If nothing else, this will cause extra handling and “paperwork” in a fast developing digital world.

Further, the IRS does not have adequate personnel to answer taxpayer phone calls with over half of those calling hanging up within an hour and those actually speaking to someone subjecting themselves to being on hold for over one hour.  And then many of the answered calls cannot be responded to by the IRS person fielding that call and they are told to call back using the same number!  How can the IRS even attempt to open the mail they will receive in Utah, let alone review each form?

Next is that most businesses use professionals to prepare their returns.  These professionals will need to be paid extra to do this work.  And in a larger sense it is work that will likely be ignored by the IRS.

This requirement is a clear illustration that the IRS as an organization is losing it, is failing to grasp the cost of what they are legislating, and certainly doesn’t look at the overall benefit to the country and economy.  The forcing of filing these forms in this case is a clear sin and travesty.

A simple solution is to have the taxpayer attach a brief statement to their return that the “repair” regulations have been adopted.  No eight page form attachment and no form mailed to Utah.  The IRS can include a review of this compliance during their normal audits of businesses.  Nothing is lost by the IRS.  Taxpayers will save the fees they will need to pay and everyone will save the handling and mailing cost and time and the ecology will save trees that would be chopped down to provide the paper for the forms and mailing envelopes.

Stupid is as stupid does and the Form 3115 requirements is big time stupid!  The IRS should rescind this immediately.  A copy of this blog has been e-mailed to my Congressman, two Senators, and the Commissioner of the IRS.  You should also do that to stop this sin and travesty.

8 Comments leave one →
  1. Joan Moffitt permalink
    February 5, 2015 2:45 pm

    Excellent email. It’s exactly what I’ve been thinking about this disaster!

  2. Vance K. Maultsby, CPA permalink
    February 5, 2015 2:50 pm

    I could not say it better. May I post your blog on my blog and give Ed and WithumSmith Brown full credit?

    Thanks.

    Vance

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    Vance Maultsby
    12221 Merit Drive, Suite 1800
    Dallas, Texas 75251
    http://www.hmpc.com
    972-404-1010 – Phone
    972-404-1122 – Fax

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  3. February 5, 2015 3:05 pm

    Great Blog. Very timely. Let’s flood the legislators and hope this encourages them to use common sense and changes requirements immediately. Praise to you Ed!

  4. Ed Mendlowitz permalink
    February 5, 2015 3:26 pm

    Thanks for comments. Use this blog any way you want. I emailed my Congresswoman and postal mailed to my two Senators and IRS Commissioner. I had trouble finding Commissioner’s address. Here is what I used: Commissioner John Koskinen
    Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC 20224

  5. Cohen, Harvey L permalink
    February 5, 2015 3:43 pm

    Ed,

    Along the lines of your suggested solution, “A simple solution is to have the taxpayer attach a brief statement to their return that the “repair” regulations have been adopted.”

    To avoid filing a separate paper which the IRS could ignore and would likely discard, instead modify an appropriate form that’s already filed by businesses in order to add an acknowledgement and certification paragraph near where the taxpayer signs. The statement could be along the lines, “the undersigned taxpayer has read or has been informed by their tax preparer of the requirements of Reg. ___ and certifies that the undersigned has complied with and/or is currently complying with the provisions of Regulation ___.”

    In fact, a tax preparer can have a stamp made with the statement so it can be added to a paper form or it can be added electronically to the selected IRS form so that the IRS won’t need to reprint any of its precious forms, which it couldn’t (or wouldn’t) do for the current year in any event.

    I need to say that this isn’t legal advice, only a suggestion from a concerned citizen and friend.

    Harvey

    Harvey L. Cohen
    Direct Tel. (908) 518-6425
    e-mail: HCohen@ldlkm.com

  6. Greg Ripke, CPA permalink
    February 5, 2015 5:56 pm

    I attended three seminars on this topic after which I scratched my head and concluded, a) even the presenters don’t understand it; b) I don’t understand it, and c) how the hell am I going to explain it to my clients. But enough stuck with me that I get a sense that taxpayers were believed to be switching methods of accounting, capitalizing repairs this year, expensing them next year. Hence, getting taxpayers to put in writing one or the other, and thereby allowing the IRS to enforce consistency. But in the process making me wary. Namely what if I, in my ignorance, recommend my clients adopt a method of accounting that I did not intend? For example I could apparently adopt a method where all repairs are capitalized?

  7. Mike permalink
    February 10, 2015 5:25 pm

    The Form 3115 is rather simple once you have a template set up, You can just cut and copy it. Copy, Paste, Review, Print and then file. End of day. It takes about the same time to attached the statement recommended above. Max 15 minutes.

  8. February 10, 2015 8:10 pm

    I fully agree and certainly will forward to my congressman….thank you

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