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The IRS Giveth, the IRS Limiteth, and the IRS Taketh Away – Retail/Restaurant Remodel-Refresh Safe Harbor

Posted by Robert J. Bauer CPA

Nov 10, 2016 2:56:00 PM

Rev. Proc. 2015-56 established an automatic accounting method change to adopt a safe-harbor method of accounting for remodel-refresh expenditures for qualified taxpayers primarily engaged in retail or restaurant businesses (including certain landlords).  This safe harbor allows qualifying taxpayers to immediately deduct 75% and capitalize 25% of their qualifying remodel-refresh costs.  Sounds great!  But there are several limitations:
  • A business or landlord is a qualified taxpayer only if it has an applicable financial statement (generally, this means an audited financial statement or a 10-k filed with the SEC).
  • A qualifying taxpayer must conduct its activities under specific NAICS codes:
    • 44 or 45; however, automotive/motor vehicle dealers, gas stations, manufactured home dealers, and non-store retailers are excluded.
    • 722; however, hotels/motels, civic organizations, amusement parks, country clubs, and any taxpayer within code 7223 (food service contractors, caterers, and mobile food trucks) are excluded.
  • Landlords qualify if the building they own or lease is leased or sub-leased to a taxpayer that operates under the above NAICS codes.
  • In addition to these major limitations, the Rev. Proc. also contains approximately two pages of specific exclusions.


With all of these exclusions and with the tangible property regulations (remember those?) being relative new, there were obviously many questions surrounding this Rev. Proc.  In response, the IRS released fourteen frequently asked questions to help clarify these provisions.  One important aspect of the Rev. Proc. that was explained in the FAQ’s was related to the potential tangible property regulation method changes that would have to be adjusted in order to utilize the remodel-refresh safe harbor method.  Specifically, a taxpayer desiring to make this change is required to revoke and not use partial disposition elections on qualifying property, place certain capitalized costs in general asset accounts (GAAs), adopt the safe-harbor method on a timely filed 3115, and appropriately classify capitalized costs under § 168(e). While these FAQ’s are helpful in providing additional guidance related to this Rev. Proc., for most taxpayers who have not already adopted the safe-harbor method these FAQ’s come too little, too late:

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Topics: tangible assets and repairs, tars, tangible property regulations, tangible property, irs, remodel refresh safe harbor, Rev. Proc. 2015-56

Receive an IRS CP 2000 Notice? Beware.

Posted by Bob Pollock

Oct 13, 2016 4:40:00 PM

The IRS is warning taxpayers that a new scam has come to their attention.  This scam involves a phony IRS CP 2000 notice and a claim that the income reported on your tax return does not match the income reported by your employer or some other third party payer. The fake notice requests taxpayers to make a payment to the “IRS Austin Processing Center”. 

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Topics: irs scams, irs, irs cp 2000

Expense Accounts-- Does Yours Pass IRS Muster?

Posted by James Cosgriff IV

Oct 14, 2015 11:52:00 AM

Many businesses reimburse their employees for expenses incurred while out of the office during business related activities.  It is important for these businesses to consider whether or not they have an “accountable plan.”  Under an accountable plan the employer does not report expenses reimbursed to employees as income to the employee.   If the business has a plan that does not meet the specific requirements of an accountable plan then the employer reports the reimbursements as income to the employee. This income will be subject to withholdings and employment taxes. 

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Topics: irs, expense accounts

De-risking a Defined Benefit Pension Plan? The IRS Ixnayed One Option

Posted by Brendan P. Brady CPA

Oct 8, 2015 11:32:12 AM

As sponsors of defined-benefit pension plans look to reduce risks associated with volatile stock de-risking strategies for plan sponorsmarkets and an aging but increasingly long-lived workforce, one strategy that has attracted particular attention in recent years is de-risking of those plans. Simply put, de-risking is a process by which companies seek to reduce or eliminate potential volatility in future pension plan contributions in order to better predict and manage cash flows and improve profitability. There are a number of de-risking strategies available to plan sponsors, ranging from liability redesign (for example, closing plan to new participants), to investment strategies (for example, utilization of dynamic asset allocation strategies), to liability transfer (for example, annuity purchases).

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Topics: employee benefit plan, de-risk, irs, defined benefit plan, pension plan

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