Is there significant likelihood of IRS audit with cost segregation?
Not according to the IRS. If you engage in a cost segregation study for the year the building was placed in service, there is no additional filing requirement. For buildings placed in service in prior tax years, generally the requirement is an automatic change in accounting method which the IRS has pre-approved per Revenue Procedure 2002-09 (Superseding 99-49, 98-60 and 96-31), with no amended returns required; although amended returns are an option for tax years still open—generally up to three years back. Bear in mind that you are changing your depreciation method from an incorrect method to a correct method, which is what generates the automatic approval. However unlikely the risk of audit, though, there is no guarantee that form 3115 will not be audited, and so we provide a clean audit trail to support our findings.
