It means no option to amend 2020, 2021 and 2022 but only to file IRS Form 3115?
That is correct.
Could you advise what this IRS Form 3115 will essentially fix and what "fines, penalties, late fees, interest and back taxes" and "additional costs really kick" will be there at the time of house sale if not done properly now?
That form is used to "correct" your past depreciation errors in the current tax year you are filing now, and "make things right" going forward.
Many folks don't realize that depreciation is not a permanent deduction. In the tax year you sell or otherwise dispose of the property, that depreciation has to be accounted for. If you sell it, then all depreciation taken, or depreciation you should have taken (whichever is higher) is recaptured in the year of the sale. Two things happen with depreciation recapture.
1) It increases your AGI for that tax year, and can potentially bump you into the next higher tax bracket. Weather it does that or not, depends on the numbers.
2) Recaptured depreciation is not taxed as ordinary income. It's taxed at the capital gains tax rate which can be anywhere from 0% to a maximum of 25%.
Now, if you end up having to pay back some of your refund from prior years (or additional tax if you didn't get a refund) that overdue unpaid balance will be charged interest for each month late. I think the interest accumulates for a maximum of 1 year, but not sure.
As for fines and penalties, if any are assessed a tax pro "might" be able to assist you with getting those forgiven. However, any interest that may be due can not be forgiven, as that is a requirement mandated by congress.
I've no clue how things work for state taxes if your state also taxes your personal income. But again, a tax pro in your local area can educate and help you with that.
