Business tax day isn’t the apocalypse some predicted

If you’d asked a Baltimore-area accountant at the beginning of the year what this tax season was going to look like for businesses, the response might have been a lot of fire and brimstone.

But by Monday, a key filing day for some types of businesses, accountants were telling a different story. They’re still dealing with some increased paperwork, but they caught a break thanks to a waiver issued by the Internal Revenue Service in February.

A long-brewing rule change dealing with accounting methods caused the ruckus earlier this tax season. When that change was first finalized for businesses, accountants anticipated being required to file complicated eight-page Form 3115s to note they’d complied for their clients.

That led to some headaches as those in the tax industry predicted a massive increase in paperwork and required manpower. The American Institute of CPAs sounded the alarm. Firms ramped up for long nights. Those who wrote about accounting warned of trouble, with one Forbes contributor predicting a “hellish tax season.”

Then the IRS waived the Form 3115 requirements for many small businesses in February. Large companies will still have to file the forms, but the move was a big break for others.

It was a break for accountants, too, said David Rosen, director of tax services at Rosen, Sapperstein & Friedlander, which has offices in Owings Mills and Columbia.

“For the first month of the busy season, it was the prime focus,” Rosen said. “Then on a Friday afternoon, the IRS issued changes and the world became relatively simple again.”

RS&F, a 50-person firm, had spent over 1,000 hours preparing for the changes, Rosen said. When the IRS came out with its waiver, the number of 3115 Forms the firm would have to file for its clients dropped from an estimated 1,000 to about a dozen.

The waiver came out February 13, about a month from Monday’s deadline by which companies filing as corporations have to file for 2014 or file for a six-month extension. (Other types of companies, like limited liability companies, have the traditionally celebrated April 15 deadline.) February might seem late in the season for the waiver, but it fits with a trend toward compression, Rosen said. Broker statements are often coming in late for taxpayers, putting a pinch on the calendar.

“It’s the broker statements,” Rosen said. “Reporting from third parties tends to be later, and the deadlines always seem to be compressed even further.”

The Form 3115 waiver only applies to small businesses with total assets of $10 million or less or annual gross receipts totaling $10 million or less. It likely won’t cover real estate companies because of their typically high asset values, said Neil Stulman, CPA at Glass Jacobson in Owings Mills.

The regulation changes’ lateness and their scope mean Stulman has put in about 150 extra hours on the issue this season, he said.

Accountants might have felt pain, but the rule changes underlying the reporting issue could be to companies’ liking. One of Stulman’s clients, Alex Cooper Auctioneers Inc., recently started a nine-month renovation project at its 34,000-square-foot location in Towson. It expects to be able to claim some costs, like those for a heating, ventilation and air-conditioning unit, right away instead of having to spread them out over decades, said Vice President Paul Cooper.

“Instead of capitalizing that over 30-plus years, you’re going to see it immediately,” he said. “Anyone doing upgrades, updates, repairs, they’re going to feel the impact.”

By Rick Seltzer  –  Reporter, Baltimore Business Journal
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