Wednesday, January 5, 2011

IRS releases Audit Technique Guide on Capitalization

There is a fine line between repairs and maintenance costs, and those costs that extend the life of an asset and therefore should be capitalized (depreciable property). One good source of reference for business people in need of guidance are IRS Audit Technique Guides.

As the name would suggest IRS Audit Technique Guides, are the actual guides that IRS Auditors follow when conducting an IRS Audit. For this reason, they can be very powerful to the average business owner, and tax professionals. This guide has specific case examples from prior court cases, including types of documentation to retain in order to form a substantial tax position on repair and maintenance and/or capitalized property.

I would encourage business owners whom are taking bookkeeping into their own hands to review this audit guide, as this particular topic can raise many questions.

Here is a link to the guide on the IRS website:,,id=231440,00.html

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