IRS provides procedures for taxpayers to change accounting methods to take advantage of new “repair” regulations on dispositions of tangible property

The IRS has issued updated guidance (Rev. Proc. 2014-54) that grants automatic consent to taxpayers to change their methods of accounting to comply with final “repair” regulations on dispositions of tangible property (TD 9689). The final regulations, issued in 2014, addressed general asset accounts, depreciation of MACRS property, and dispositions of MACRS property. Rev. Proc. 2014-54 is the final chapter in the repair regulations guidance project, which has lasted for more than 10 years.

Effective dates

The final regulations and the guidance on accounting method changes apply to tax years beginning on or after January 1, 2014. The IRS is not auditing taxpayers’ accounting methods for tangible property through 2014, so that taxpayers can concentrate on switching to the required methods. After 2014, the IRS may audit taxpayers’ accounting methods and their compliance with the final regulations.  The final regulations generally are taxpayer-favorable but will require most taxpayers to file a request in change of accounting method.

Automatic consent

The new procedures waive various scope limitations on automatic consent, thus enabling taxpayers to change their accounting methods more easily. This waiver extends through the end of 2014 and applies to taxpayers who changed the same accounting method within the past five years, are under audit, or are engaged in the last year of a trade or business. After the 2014 tax return deadline, taxpayers can still obtain automatic consent, but only if they do not violate one of the scope limitations.