Have you ever discovered something about your business’s taxes that made you wonder, “Why didn’t my previous accountant catch that?” You’re not alone.
One of the most common areas where businesses and investors lose money on their taxes is depreciation—especially when assets like buildings or renovations aren’t classified or handled properly. Thankfully, there’s a powerful IRS-approved way to fix certain past mistakes without going through the hassle of amending multiple old tax returns: IRS Form 3115.
What’s the Issue?
Depreciation allows you to write off the cost of property and equipment over time, reducing your taxable income each year. But sometimes, the method used by a previous accountant or firm wasn’t the best choice—or just plain wrong.
Some examples include:
- Renovations or leasehold improvements being depreciated over 39 years when they actually qualify for a much shorter 15-year schedule (which means bigger deductions, sooner).
- Step-up in basis being missed during a property purchase, meaning you’re depreciating less than you legally could.
These kinds of mistakes don’t just sit quietly—they add up over time, potentially costing you tens or hundreds of thousands of dollars in lost deductions.
The Good News: You Can Fix This—And Get Caught Up
The IRS allows business owners and real estate investors to correct depreciation errors using Form 3115, which lets you:
✅ Claim Missed Deductions in the Current Year
Instead of spreading the correction over many years—or worse, continuing to miss it—Form 3115 lets you take a one-time adjustment now. That means a larger deduction today, not years from now.
✅ Avoid the Hassle of Amending Prior-Year Returns
Normally, fixing past tax issues means going back and amending old returns. That’s time-consuming, expensive, and sometimes risky. With Form 3115, you can usually fix the issue going forward, as part of your current return.
✅ Boost Cash Flow and Lower Your Tax Bill
Correcting depreciation the right way often leads to a substantial deduction in the current tax year—money that can stay in your business rather than being sent to the IRS.
✅ Fix Past Mistakes Without Drawing Unwanted Attention
Using Form 3115 under the IRS’s “automatic change” rules is a standard, accepted practice. It’s not a red flag—it’s smart tax management.
Is This You?
- Did you buy or renovate a property in the last several years?
- Have you switched CPAs or found errors in prior tax filings?
- Are you unsure whether your assets are being depreciated correctly?
If so, it might be worth reviewing your depreciation strategy. Correcting it now—rather than letting the mistake continue—could lead to significant tax savings.
Final Thoughts
Fixing past tax issues doesn’t have to be painful. IRS Form 3115 is a practical, IRS-approved way to recover missed deductions and clean up depreciation schedules without opening up old tax returns.
If you’d like to explore whether this strategy could work for you or your business, feel free to reach out. A 15-minute conversation could uncover opportunities to lower your tax bill and strengthen your financial position.
