October 15 Due Date for Extensions and Retroactive Business Expenses Rapidly Approaching

Individuals: October 15 is Extended Due Date for FIling 2014 Federal Individual Tax Returns

If you could not complete your 2014 tax return by the normal April filing due date, and are now on extension, that extension expires on October 15, 2015, and there are no additional extensions. Failure to file before the extension period runs out can subject you to late-filing penalties.

There are no additional extensions, so if you still do not or will not have all of the information needed to complete your return by the extended due date, please call the office so that we can explore your options for meeting your October 15 filing deadline.

If you are waiting for a K-1 from a partnership, S-corporation, or fiduciary return, the extended deadline for those returns was September 15. So, if you have not received that information yet, you should probably make inquiries.

Late-filed individual federal returns are subject to a penalty of 5% of the tax due for each month, or part of a month, for which a return is not filed, up to a maximum of 25% of the tax due. If you are required to file a state return and do not do so, the state will also charge a late-file penalty. The filing extension deadline for individual returns for most states is also October 15.

Business: October 15 is Last Chance to Take Advantage of Retroactive Business Expensing

If you are a small business owner, October 15, 2015, is your last chance to retroactively adopt the new tangible property regulations that took effect in 2014.

Why is adopting these new regulations important? They give you the opportunity to expense items that you had capitalized (depreciated) in years for which the three-year statute of limitations has not yet expired. As an example, say you are a landlord, and you replaced the roof on your rental at a cost $6,000 in 2012. Prior to the new regulations, that expense would have been treated as a capital expense, and you would have had to depreciate it (deduct it slowly), over 27½ or 39 years. However, under the new regulations, the expense of replacing the roofing membrane is fully deductible in the year the cost was incurred.

Another benefit of adopting the regulations retroactively is the treatment of what is termed a partial disposition. This refers to the replacement of a portion of an existing capital asset, such as the roof in the prior example. In the past, the remaining undepreciated value of the replaced roof would have continued to be depreciated along with the rest of the building for the remainder of the building’s life. Under the new regulations, the undepreciated value of the existing roof can be expensed in the replacement year under the partial disposition rules.

Although we used a building and roof to illustrate these new provisions, these rules don’t just apply to buildings; they apply to all tangible business assets.

However, adopting the regulations retroactively requires affirmative action on your part by the extended due date of your 2014 return, which is October 15, 2015. Failing to adopt the regulations by the October date is not the end of the world; it just means that you default to adopting the regulation prospectively and cannot take advantage of any retroactive adjustments.

To adopt the regulation retroactively, you must file an appropriately completed IRS Form 3115 with your 2014 return.