At the urging of the American Institute of CPAs (AICPA), the Internal Revenue Service (IRS) increased the de minimis safe harbor from $500 to $2,500 under the tangible property regulations for small business without applicable financial statements. The IRS announced the change on November 24 in Notice 2015-82.
The AICPA wrote in its October 8, 2014 letter to the IRS, “As we and our members have discussed with you on multiple occasions, we are particularly concerned about the administrative impact of the low amount ($500) of the de minimis safe harbor threshold for taxpayers without an applicable financial statement, the retrospective application of the rules, and the related administrative burdens on small businesses.”
Melissa M. Labant, AICPA director of tax advocacy, said, “The increase from $500 to $2,500 will make a big difference to small businesses. They will be able to deduct more expenses and will not have to deal with onerous paperwork. We appreciate that the IRS solicited comments and listened to the tax practitioner and small business communities.”
The new threshold is effective for costs incurred during taxable years beginning on or after January 1, 2016. However, the notice generally provides protections to small businesses undergoing examinations for earlier tax years.
For more details, read the November 24 Journal of Accountancy article.