Adjust De Minimis Safe Harbor Election for previous tax years.

[Waterl]

We've been using De Minnimus Safe Harbor for several years. While preparing 2018's taxes, I happened to notice the limit was raised from 500 to 2500 in 2016. I've properly ajusted my 2018 since it has not been filed, and am wondering if I need or should go back an update my 2016 & 2017 taxes appropriately.  The following questions are going through my mind...

1. Will I get in trouble for not sticking to the 2500 (ie depreciating something that was 1k..)

2. Is there a benefit to changing aside from a quicker write off? I'm thinking if I don't change - I'll be required to reclaim the depreciation when I sell?

3. Is there some way I can just take care of this through adjustments in my 2018 business returns since I have not filed yet? (I'm using TT Business).

4. If not - do I just 'amend' a previous years return (starting at 2016... then 2017.. etc.)

Thank You in advance for your thoughts!

[tagteam]

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@Waterl wrote:

Thank You in advance for your thoughts!

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My thoughts are as follows:

There are definitely benefits to the De Minimis Safe Harbor Election but, pursuant to Treas. Reg.  §1.263(a)-1(f)(5), you must attach a statement for the election to your timely filed original federal tax return including any extension for the taxable year in which the amounts subject to the election are paid.

Consequently, you cannot simply amend your prior year tax returns because changing the treatment of an item or items on those returns would be a change in your method of accounting and that would require filing Form 3115, which is something you do not want to attempt without professional tax guidance (it is not a DIY project).

At this point, it probably does not need to be stated that you cannot include foregone amounts from previous tax years on your 2018 income tax return.

See generally https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations

[Waterl]

Thanks for your response. To clarify, I did file de minimus in all the previous years (since it started in 2013?). I did include the appropriate additional statement. I was mainly concerned as I didn't realize the safe limit went from 500 to 2500 in 2016 (and onward). So in 2016 & 2017 I have a few items that should have been within the limit (500-2500 range) and written off immediately, but rather I depreciated anything in the 500-2500 range over the appropriate amount of time for the item.

At this point, I decided to just leave it. In reality, I think my error is beneficial to the IRS (not me.) Unless there is some straight forward way to fix it.

[tagteam]

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@Waterl wrote:

At this point, I decided to just leave it.

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That is a wise decision, I believe. It is almost moot at this juncture, particularly if we are talking about 5-year property.