The Internal Revenue Service (IRS) has announced a new pilot program related to the audit of Schedule F. Schedule F is used for reporting profit or loss from a farming or ranching operation on an individual filed Form 1040.
The pilot program is scheduled to begin April 1, 2017, and will only be implemented at the Brookhaven Internal Revenue Service Center. The pilot program is expected to last for one year.
The purpose of the new IRS program is to test certain deductions being claimed on the Form 1040 Schedule F forms that are audited. The IRS wants to determine if expensing compliance is adequate or is there a lack of proper reporting that would suggest the program needs to expand to other IRS Service Centers.
Some of the Schedule F expense items to be reviewed are:
- Prepaid Farm Expenses (supplies): Are they really deposits?
- Fuel Expenses: Are they for the farm or personal use?
- Mortgage Interest: Should it be an itemized deduction?
- Repairs: Are they actually improvements?
Although the pilot program is conducted from the Brookhaven Internal Revenue Service Center, the IRS will survey returns from across the country. This presents an opportunity for clients to review their own current expensing practices and determine if any modifications should be considered.
Nearly ten years after the release of the initial exposure draft, FASB issued ASU 2016-02, Leases - The standard may have been issued, but the conversation about this re-write of legacy guidance has not slowed.