Hall, Kistler & Company http://www.hallkistlerblog.com Blog Wed, 14 Nov 2018 20:04:42 +0000 en-US hourly 1 What’s This Asset Retirement Obligation I Keep Hearing About? http://www.hallkistlerblog.com/whats-this-asset-retirement-obligation-i-keep-hearing-about/ http://www.hallkistlerblog.com/whats-this-asset-retirement-obligation-i-keep-hearing-about/#respond Wed, 14 Nov 2018 19:51:23 +0000 http://www.hallkistlerblog.com/?p=363 By Andy Griffin, CPA, Supervisor and Keith A. Arner, CPA, CVA, Partner

As we’ve described previously, one of the components of “getting back in the game” for small independent E&P companies is producing financial statements that are compliant with Generally …

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By Andy Griffin, CPA, Supervisor and Keith A. Arner, CPA, CVA, Partner

As we’ve described previously, one of the components of “getting back in the game” for small independent E&P companies is producing financial statements that are compliant with Generally Accepted Accounting Principles (GAAP). One of the items required by GAAP is something called an asset retirement obligation liability.

So what does this mean? And how is it calculated?

To put it simply, an asset retirement obligation (ARO) liability represents your costs to plug a well. However, it does not necessarily mean the amount you’re laying out today in cash to have someone plug a well for you (or to do it yourself). What it really measures is your liability today for wells to be plugged in the future. Per GAAP, you can’t just wait to expense those costs as they occur.

GAAP dictates that liability is created once a legal obligation to retire an asset exists. So once you commence drilling a well (or acquire a well) you have already established a liability; in other words, once you’ve punched a hole in the ground, that hole has to be plugged at some point by state law. The questions now become:
1) How long is this well going to last and when are we going to plug it?
2) How much is it going to cost to plug the well, at the point that we’re
actually going to plug it?

One thing to remember when thinking about an ARO calculation: it’s an estimate. Obviously, we don’t know how long each well is going to last. We don’t know to the penny how much it’s going to cost to plug each well. And we don’t know where commodity prices are headed, which might have an effect on which wells get plugged and when. However, even though it’s an estimate, it’s still critical to calculate the amount using solid, reasonable assumptions that can be supported with evidence.

The best way to determine “well lives” is to obtain an engineer’s reserve report on all of your wells. This step may be expensive, but it is essential for a reasonable basis of determining the life of a well. Most companies have this report done every year, due to changes in the market that might change “well lives” and thus affect the calculation. For example, if price per MCF is $2, that might mean many more of your wells are going to be uneconomical to operate and may dictate candidates for plugging. If the price per MCF is $8, now those wells are economic and viable, and plugging is going to get pushed further into the future. An engineer will use estimates of future pricing and other factors such as the formation the wells are in to generate an estimated life for each well.

As mentioned above, the other question is how much is it going to cost? Remember, these wells might be plugged 30 years (or more) from now. Calculating an ARO involves inflation factors and also a present value factor to determine what the obligation in the future is valued at in today’s dollars. However, to do that correctly, you have to start with a sound, reasonable estimate that can be supported (sound familiar?). This might require an analysis by company engineers of the depth of a certain type of well, or how much cement might be needed, or the cost of labor to have a crew plug the well, or how much it would cost to do it internally vs. outsourcing, or vice versa. It might also require looking at the Department of Natural Resources filings. It might even be helpful to talk to other companies in the industry to get a feel for what they see regarding costs to plug their wells.

As you can see, calculating an ARO requires some critical thought and analysis, and good, conservative judgment. These are the most critical and essential steps for any accounting estimate. It may seem like a lot of work for something that just exists on paper, but remember, it’s a critical part of producing GAAP-compliant statements. Proper financial statements are going to be a necessity as your company grows.

For other blog posts on this topic, search under the Category “Oil and Gas.” You can also subscribe to our newsletter or contact us for more information about your oil and gas accounting needs.

Hall, Kistler & Company has been helping producers in the oil and gas field since we opened our doors in 1941. We know what it takes to produce proper GAAP financial statements for oil and gas companies and can provide guidance along the way. Let us help when you are coming off the sidelines and BACK INTO THE GAME.

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Get Back in the Game: E&P Financial Reporting http://www.hallkistlerblog.com/get-back-in-the-game-ep-financial-reporting/ http://www.hallkistlerblog.com/get-back-in-the-game-ep-financial-reporting/#respond Wed, 24 Oct 2018 14:28:24 +0000 http://www.hallkistlerblog.com/?p=333 By Keith A. Arner, CPA, CVA, Partner and Andy Griffin, CPA, Supervisor

During the mad dash for deep shale acreage, when exploration and production companies like Chesapeake, Gulfport, Ascent, and others were acquiring leases, many independent producers in the Utica …

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By Keith A. Arner, CPA, CVA, Partner and Andy Griffin, CPA, Supervisor

During the mad dash for deep shale acreage, when exploration and production companies like Chesapeake, Gulfport, Ascent, and others were acquiring leases, many independent producers in the Utica Shale region sold their deep acreage rights. For several years, these independent producers watched from the sidelines, sometimes just breaking even while operating their shallow wells in a very tough environment for commodity prices.

Now, time has passed and many of the larger exploration and production (E&P) companies, due to their large overhead, are unloading their acreage and wells because they are not able to economically produce in the current market. However, many independent smaller producers have found that they are able to produce economically — by observing and studying the processes of the larger companies and benefiting from the new technologies those companies developed over the years.

To use a football analogy, independent producers have studied the offense and watched the game film, and are now coming off the sidelines and getting back in the game.

At this point, any E&P company will find that, in order to obtain financing or enter into credit facilities with financial institutions, one of the requirements is usually going to be a set of financial statements that follow generally accepted accounting principles (GAAP). GAAP requires several items and adjustments that are somewhat unique to the oil and gas world. As we help producers with their financial statements, the following questions usually come up:

• What’s this “asset retirement obligation” I keep hearing about?

• Why do I need to record any accrued production? Payments are usually two to three months behind in the oil and gas world.

• Do I really need to spend the money to get a reserve report from an engineer?

• My banker told me we’ll need financial statements with footnotes and disclosures? What does that mean? Am I disclosing everything that needs to be in there?

• This is the first year we entered into any hedging transactions – where do these go on our books?

We are going to answer each of these questions in upcoming blog posts, so search our blog under the Category “Oil & Gas.” You can also subscribe to our newsletter or contact us for more information about our oil and gas services and experience.

Hall, Kistler & Company has been helping producers in the oil and gas industry since we opened our doors in 1941. We know what it takes to produce proper GAAP financial statements for oil and gas companies and can provide guidance along the way. Let us help when you are coming off of the sidelines and BACK INTO THE GAME.

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Family Business Succession Planning http://www.hallkistlerblog.com/family-business-succession-planning/ http://www.hallkistlerblog.com/family-business-succession-planning/#respond Tue, 14 Aug 2018 20:27:45 +0000 http://www.hallkistlerblog.com/?p=327 I’m often asked by my clients, “How do I transition my company to the next generation?”.

In order for a succession to be successful, it needs to work for both parties. Clients are advised early in our business relationship about …

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I’m often asked by my clients, “How do I transition my company to the next generation?”.

In order for a succession to be successful, it needs to work for both parties. Clients are advised early in our business relationship about succession planning so that they are in a stronger financial position when the time comes to transition the company. The objective is to eliminate debt and maximize their retirement so there is not a significant strain on cash flow during the transition process.

One of the first issues we discuss is what their cash flow needs are to fund their lifestyle. Once I know how much is needed to maintain their desired lifestyle and the value of their company has been assessed, I will work with them to determine how the next generation and the company can make a smooth transition.

I recently worked on a transition plan to the fourth generation (father to son’s) in which we did a combination of gifting and the sale of stock in order to make the transition cash flow. This provided the third generation the cash flow needed for their lifestyle and allowed the fourth generation and the company to cash flow the transition without overburdening the company.

Succession planning takes a coordinated effort between the shareholders, your accountant and your attorney to make the transition as smooth as possible. If you or someone you know is struggling with or is curious about succession planning, do not hesitate to contact me at franklin@hallkistler.com or 330-453-7633.

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Ohio Tax Amnesty is January 1, 2018, through February 15, 2018, for Individuals and Businesses http://www.hallkistlerblog.com/ohio-tax-amnesty-january-1-2018-february-15-2018-individuals-businesses/ http://www.hallkistlerblog.com/ohio-tax-amnesty-january-1-2018-february-15-2018-individuals-businesses/#respond Mon, 04 Dec 2017 21:14:41 +0000 http://www.hallkistlerblog.com/?p=322 Avoid ALL penalties and HALF of your interest!

If you have unpaid taxes, Ohio Tax Amnesty could help you avoid 100% of penalties and 50% of interest due. Ohio Tax Amnesty will help you achieve a fresh start and settle …

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Avoid ALL penalties and HALF of your interest!

If you have unpaid taxes, Ohio Tax Amnesty could help you avoid 100% of penalties and 50% of interest due. Ohio Tax Amnesty will help you achieve a fresh start and settle your unpaid taxes that you have unreported* or underreported that were due and payable as of May 1, 2017.

You may qualify if you have certain unpaid taxes that were due as of May 1, 2017, and have NOT been contacted by the Ohio Department of Taxation. Not all taxes are eligible for Ohio Tax Amnesty; however, the following taxes are eligible:
• Individual Income Tax
• Individual School District Income Tax
• Employer Withholding Tax
• Employer Withholding School District Income Tax
• Pass-Through Entity Tax
• Sales Tax
• Use Tax
• Commercial Activity Tax
• Financial Institution Tax
• Cigarette or Other Tobacco Products Tax
• Alcoholic Beverage Tax

To be approved for Ohio Tax Amnesty, you must submit an application, all appropriate tax return(s) and full payment before the deadline. No partial payments or credit card payments can be accepted. The Ohio Tax Amnesty does not apply to you if the Ohio Department of Taxation has been in contact with you about your tax debt or if you filed a tax return but did not pay taxes.

If you are unsure if you have unreported or underreported taxes, please contact me at 330-453-7633 or sandrao@hallkistler.com.

*Unreported means you know you owe back tax but have not yet been contacted by the Ohio Department of Taxation.

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Credit for Production of Natural Gas from Marginal Wells – Why it’s not too late to claim! http://www.hallkistlerblog.com/credit-production-natural-gas-marginal-wells-not-late-claim/ http://www.hallkistlerblog.com/credit-production-natural-gas-marginal-wells-not-late-claim/#respond Wed, 29 Nov 2017 20:46:04 +0000 http://www.hallkistlerblog.com/?p=317 This past fall Notice 2017-51 was issued by the IRS to provide guidance on the marginal well production credit. The notice computed the credit amount for calendar year 2016 at $0.14 per mcf as well as provided guidance on claiming …

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This past fall Notice 2017-51 was issued by the IRS to provide guidance on the marginal well production credit. The notice computed the credit amount for calendar year 2016 at $0.14 per mcf as well as provided guidance on claiming the credit. This credit is computed on a taxpayers production from a marginal well as defined by the code in which the taxpayer holds an operating interest. The notice states that a taxpayer who filed a 2016 return on or before October 2, 2017, and either did not claim the credit or claimed the credit in an amount that differs from the amount determined using the applicable reference price stated in this notice may file an amended return.
Although the credit is not as high as was predicted, we have found this credit to be very beneficial to our conventional producers. If you need any assistance in amending returns or calculating the credit, please contact me at 330-453-7633 or keith@hallkistler.com.

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Artificial Intelligence (AI)…Coming soon to the big screen! http://www.hallkistlerblog.com/artificial-intelligence-ai-coming-soon-big-screen/ http://www.hallkistlerblog.com/artificial-intelligence-ai-coming-soon-big-screen/#respond Tue, 18 Jul 2017 17:59:34 +0000 http://www.hallkistlerblog.com/?p=298 By Sarah Yost, Senior Accountant, QuickBooks Online ProAdvisor

Terminator, WALL-E, Short Circuit and your accounting firm – what do these things have in common? Artificial intelligence (AI).

What is AI? “AI is a machine or computer software that acts …

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By Sarah Yost, Senior Accountant, QuickBooks Online ProAdvisor

Terminator, WALL-E, Short Circuit and your accounting firm – what do these things have in common? Artificial intelligence (AI).

What is AI? “AI is a machine or computer software that acts with general human intelligence” (Watson). What it means for us in the accounting world is that it can take tons of data and filter through it looking for specific anomalies or similarities.  AI is certainly not a new concept, but we will be seeing its benefits more and more when it comes to gaining efficiencies in the work we perform for our clients.

We’ve come a long way with technology as a society and Hall, Kistler has been keeping up with it on the accounting side. You may not know it, but Hall, Kistler, has been using AI software for years. Whether it’s IDEA Data Analysis Software with our audits and business valuations, Gruntworx with assisting in tax preparation or even bank feeds in QuickBooks matching up transactions, these tools have been helping us help you on a daily basis.

As a firm, we take technology (and the security that goes along with it) very seriously. We make sure to move towards hardware and software that will benefit our clients directly or indirectly. Some might wonder if the technology may someday put accountants out of business? On the contrary, now that we have the tools that improve our data mining and data entry, we can focus more time and effort on your big picture.

So while the term “big screen” in the title may have been a bit of a stretch, if you’ve seen some of the monitors we use in the office, it is actually somewhat accurate. We are constantly adapting and focused on the future for our clients and we are excited to watch as AI continues to take over “our world” to enhance yours.

Resource: Watson, Ryan, CPA (2017. May 16). Why Artificial Intelligence is Only the Beginning for Accountants. Retrieved from: https://www.ohiocpa.com/news-resources/news/2017/05/16/why-artificial-intelligence-is-only-the-beginning-for-accountants

 

 

 

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“App-solutely” Helpful QuickBooks Apps http://www.hallkistlerblog.com/app-solutely-helpful-quickbooks-apps/ http://www.hallkistlerblog.com/app-solutely-helpful-quickbooks-apps/#respond Mon, 03 Aug 2015 19:10:32 +0000 http://www.hallkistlerblog.com/?p=282 By Sarah Yost, Senior Accountant and QuickBooks Online ProAdvisor

Heavy QuickBooks users, or those in a specialized industry, know that while the bookkeeping software giant has become much more user-friendly over the years, there are still limitations. Despite the challenges, …

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By Sarah Yost, Senior Accountant and QuickBooks Online ProAdvisor

Heavy QuickBooks users, or those in a specialized industry, know that while the bookkeeping software giant has become much more user-friendly over the years, there are still limitations. Despite the challenges, QuickBooks is by far the most comprehensive tool available for most, and thus a staple of bookkeeping for many businesses. Many Hall, Kistler & Company clients rely on the program to handle their day-to-day bookkeeping with great success, but find areas where they wish the program were a bit easier to use or more specifically adapted to their niche’s needs. This is where Apps come in.

Apps further enhance your ability to do business efficiently, and many tie right into the software to which you have grown accustomed. Some of these tools that save you so much time and frustration are completely free to download and use, and others typically come at a price that is quite reasonable. Here are some of the top rated apps on Intuit’s website:

– TSheets Time Tracker – This app allows you and your employees to track time with any computer, cell phone or landline and it integrates directly into QuickBooks payroll.

– Method:CRM – CRM stands for Customer Relationship Management and Method specializes in keeping your customer information in a format that is easy to use and integrates smoothly with Quickbooks.

– Fundbox – If you have cash flow problems, this app gets you paid instantly for outstanding invoices while your customers can still follow a net 30 or 60 payment schedule.

– Bill.com – This automates payables and receivables online in one location and automatically syncs with QuickBooks Desktop and Online.

– Transaction Pro Importer – This little gem imports many list transaction types into QuickBooks Online from Excel or text files.

– eCC Cloud – Companies that do a lot of online business love this app, which syncs online sales from Amazon, eBay and more straight into QuickBooks.

– Shoeboxed – You can send receipts into the company using prepaid envelopes and Shoeboxed will scan and categorize them into QuickBooks for you.

There are many more apps out there for almost every function and every market segment imaginable. If you have been wishing QuickBooks could do some particular task, odds are you aren’t alone and someone has figured out a way to make it happen. There may be tools out there to help you accomplish exactly what you want to, so go ahead and ask Hall, Kistler & Company! Give us a call at 330-453-7633 and we’ll help you find the best QuickBooks apps to make your life simpler.

Reference: https://apps.intuit.com/

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Ohioans Win with New State Tax Laws http://www.hallkistlerblog.com/ohioans-win-with-new-state-tax-laws-2/ http://www.hallkistlerblog.com/ohioans-win-with-new-state-tax-laws-2/#respond Wed, 29 Jul 2015 15:39:29 +0000 http://www.hallkistlerblog.com/?p=276 by Karen Brenneman, CPA, MT, Managing Partner

 Governor Kasich signed Ohio House Bill 64 into law on July 2 providing new tax rate reductions that will benefit both individuals and small businesses in our fine state. The newly enacted …

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by Karen Brenneman, CPA, MT, Managing Partner

 Governor Kasich signed Ohio House Bill 64 into law on July 2 providing new tax rate reductions that will benefit both individuals and small businesses in our fine state. The newly enacted law may have a funny name (Amended Substituted House Bill 64) but it contains a number of positive tax changes for Hall, Kistler & Company clients and all Ohioans, including:

  • An across the board tax rate cut of 6.3% for individuals, making the top tax bracket less than 5% retroactive to January 2015. This is the lowest Ohio rates have been since 1982. New withholding tables will be coming to employers later in July.
  • The small business deduction of 75% on the first $250,000 of business income is continued for 2015 and will increase to 100% for 2016 and beyond. A new flat tax of 3% of business income from pass-through entities will be in effect for 2015 on business income above $250,000.
  • There are now two Ohio tax apps you may want to deploy. One checks on your tax refund and the other is a sales tax rate finder based on your current location. The latter may come in handy for business owners on the move that have to charge sales tax.

There are also a few things the budget didn’t include, which I find positive as well. Two of these significant omissions are

  • No increase, as proposed, in the Ohio CAT rate
  • No base expansion of state sales tax on professional services

Giving us some indication of where our state tax system is headed, the law also called for a tax policy study commission to make recommendations on further reforming Ohio’s tax system. Specific questions include determining how best to:

  • Transition Ohio’s personal income tax to a 3.5% – 3.75% flat tax
  • Reform the tax code to maximize Ohio competitiveness
  • Reform the state’s severance tax by October 1
  • Make some of Ohio’s tax credits work more efficiently by converting them to grant programs

The last piece of good news is a sales tax holiday slated to run from August 7 through August 9. It exempts sales tax on Ohio purchases of school clothes up to $75 per item as well as school supplies and other school related items up to $20 each during these days.

With this new set of tax laws, you have a real opportunity to devise strategies that will lower your tax liability and enhance your overall financial position for years to come. Hall, Kistler & Company is happy to help you determine the best approach for your situation, so that you can take full advantage of the changes in House Bill 64.

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Everything You Need to Know About Ohio’s Sales Tax Holiday http://www.hallkistlerblog.com/everything-you-need-to-know-about-ohios-sales-tax-holiday/ http://www.hallkistlerblog.com/everything-you-need-to-know-about-ohios-sales-tax-holiday/#respond Mon, 27 Jul 2015 15:37:38 +0000 http://www.hallkistlerblog.com/?p=257 By Constance P. Aycock, EA, Tax Compliance Director

Here at Hall Kistler & Company, we are finding it hard to believe that summer vacation is nearly over. To lesson the burden of purchasing all the necessary school clothes and …

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By Constance P. Aycock, EA, Tax Compliance Director

Here at Hall Kistler & Company, we are finding it hard to believe that summer vacation is nearly over. To lesson the burden of purchasing all the necessary school clothes and supplies, Ohio has implemented a one-year sales tax holiday running from Friday, August 7 through Sunday, August 9, 2015. While the sales tax holiday seems to be geared specifically to students, shoppers of any age can take advantage of the various exemptions (as long as the items will not be “used in a trade or business”).

The concept of a tax holiday may be simple but the details most certainly are not. Ohio is making it complicated for retailers and consumers alike by exempting only very specific items. Retailers are required to know the rules because their participation in the sales tax holiday is NOT voluntary. However, we, as consumers need to educate ourselves so that we can take full advantage of this brief window! During the sales tax holiday, the following items will be exempt from state taxes:

  •  Clothing – each item priced at $75 or less. Generally sports and recreational equipment will not be exempt and the exemption would NOT include the following: ballet shoes, tap shoes, cleated shoes, shin guards and baseball gloves. Athletic shoes (is it okay if I call them all tennis shoes?) and school uniforms (where each item is less than $75) would be exempt, however handbags, cosmetics and briefcases are not. Diapers for both children and adults, including disposable diapers, are exempt. Looking at this list, shoppers may wonder: Is the first $75 of a qualified item that costs more than $75 eligible for the exemption? The answer is NO – it applies to each item selling for less than $75. However, if you have a store coupon that brings the item price down to under $75, that item would then qualify for the exemption – so get out those Kohl’s and Penney’s coupons!
  •  School supplies – each item priced at $20 or less. There is a very specific list of school supplies on the Ohio Department of Taxation website. Only the items listed qualify for the school supplies exemption. If the consumer has a manufacturer’s coupon (third party reimbursement), that reimbursement does not reduce the item’s sale price for determining whether the item is eligible for the exemption. For example, a $5 manufacturer’s coupon on a $22 school supply does not cause the item to qualify for the exemption because the retailer is going to be reimbursed by the manufacturer. Personally, I would use the coupon and pay the sales tax on that Trapper Keeper that the child whining in the school supply section at Target absolutely has to have.
  •  School instructional materials – each item priced at $20 or less. The definition means WRITTEN material commonly used by a student to learn the subject and only includes the following items: reference books, reference maps and globes, textbooks and workbooks. While it’s nice that they’re on the list, it will be extremely difficult to find many of these items for less than $20.

Items commonly used in a trade or business are NOT exempt under the sales tax holiday. If, for some reason, the retailer does not charge the consumer sales tax on trade or business items, the consumer is responsible for the use tax on the items. The use tax can be paid when the consumer files his or her individual income tax return.

And finally, the sales tax holiday includes purchases made on the internet as long as they are paid for during the designated period and the retailer accepts the order for immediate shipment, even if delivery is made after the exemption period.

To learn more about Ohio’s sales tax holiday or other ways to reduce your tax expenditures, please contact Hall, Kistler & Company. Happy school shopping!

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Hall, Kistler & Company-Is Your Business Prepared for Repair Regulations? http://www.hallkistlerblog.com/hall-kistler-company-is-your-business-prepared-for-repair-regulations/ http://www.hallkistlerblog.com/hall-kistler-company-is-your-business-prepared-for-repair-regulations/#respond Wed, 13 May 2015 18:16:38 +0000 http://www.hallkistlerblog.com/?p=252 By John J. Skakun, CPA, Partner

With the finalization and implementation of the IRS’s new tangible property regulations, planning for taxes poses a more serious challenge for many businesses than it has in previous years. The updated code is …

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By John J. Skakun, CPA, Partner

With the finalization and implementation of the IRS’s new tangible property regulations, planning for taxes poses a more serious challenge for many businesses than it has in previous years. The updated code is intended to help tax filers distinguish correctly between legitimate capital expenditures and supplies, repairs, maintenance or other business expenses that are tax deductible.

The Repair Regulations took effect January 1, 2014, meaning that tax years begun on or after that date are subject to the revised guidelines. As a result, many businesses follow policies that are out of compliance for the current tax filing year, but also must implement changes retroactively to comply with the newly clarified rules. Oil and gas industry players are impacted significantly with these changes, as are participants in industries such as utilities, manufacturing, retail and hospitality.

While having a clear, final set of rules that leave no room for confusion is a positive development in theory, millions of business owners and their accountants dreaded filing Form 3115, Application for Change in Accounting Method, which appeared to be necessary in a very high number of cases to avoid running afoul of the final rules. Doing so would have added a burdensome layer of complexity to the record-keeping and tax filing process, creating the very confusion the IRS hoped to reduce and increasing the cost of remaining compliant.

The American Institute of CPAs wrote to the IRS in October of 2014 requesting relief for the administrative burden imposed on small businesses by the new rules. In particular, the organization sought help for taxpayers that would increase the de minimis safe harbor of $500 for small businesses and allow these filers to apply the changes for current and future years, without aligning past years’ returns to meet the current regulations.

Much to the relief of taxpayers and accountants alike, the IRS announced in February of 2015 a revised set of procedures for small businesses, designed to be simpler and easier to comply with. Beginning with 2014 returns filed in 2015, small businesses are permitted to switch over to a different accounting method “on a prospective basis for the first taxable year beginning on or after Jan. 1, 2014” as the AICPA had requested.

What’s more, those that opted for the simplified procedure for their 2014 returns are relieved of the responsibility to file Form 3115. Using the form is still an option available to those who prefer to utilize it in requesting a change of accounting method. Small businesses are defined for the purposes of this regulation as those with assets under $10 million or producing gross receipts no more than $10 million on an annual average basis.

“We are pleased to be able to offer this relief to small business owners and their tax preparers in time for them to take advantage of it on their 2014 return,” reported John Koskinen, the current IRS Commissioner. “We carefully reviewed the comments we received and especially appreciate the valuable feedback provided by the professional tax community on this issue.”

The IRS may not be quite done with the issue, either. The agency is seeking comment on the idea of raising the $500 safe-harbor threshold for deducted expenses. The American Institute of CPAs has weighed in with a strong message of support for raising the safe harbor de minimis limit, but the IRS has yet to announce a final decision.

Even with the threshold question still pending, the simplification is extremely good news for small business owners and their tax professionals. However, there is still much to consider when planning for next year’s taxes. Business owners are strongly encouraged to examine their formal capitalization policies and to create one if there is no current written policy.

Given the revisions to tangible property regulations and the changes to business protocol that may be desirable given the new situation, it is more important than ever for business owners to seek knowledgeable business advisory services to help them make smart decisions that will benefit their bottom line. Please contact Hall, Kistler & Company as soon as possible to schedule a consultation to determine your most profitable path forward.

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