IRS Revises Form 3115 for Changes in Accounting Method (article)

IRS Revises Form 3115 for Changes in Accounting Method (article)

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The IRS has issued a revised Form 3115, Application for Change in Accounting Method, for taxpayers to request IRS consent to any change in method of accounting (Announcement 2016-14). To provide a transition to the new form, the IRS requested taxpayers start using the revised form immediately, but will not mandate that taxpayers use the revised form until April 20, 2016, unless use of the 2015 revision is specifically required in guidance.

The new form, revised December 2015, replaces the December 2009 revision of the form and is the current Form 3115. The IRS stated that taxpayers requesting IRS consent to change their method of accounting must use the current Form 3115 (emphasis in original).

Comment. The IRS indicated that regardless of the form used, taxpayers must provide all information required by Rev. Proc. 2015-13 (revised procedures for all accounting method changes, issued in January 2015) or its predecessor.

Change in Accounting Method

Under Code Sec. 446(e), taxpayers must obtain IRS consent to change their method of accounting for federal tax purposes. Taxpayers request either advance consent for non-automatic changes, or automatic consent for changes that the IRS previously approved in general guidance. In 2015, the IRS issued Rev. Proc. 2015-13, which updated and made significant changes to the general procedures for obtaining both advance and automatic consent to a change.

The IRS also issued Rev. Proc. 2015-14 to update the list of accounting method changes for which automatic consent is available, and to modify Rev. Proc. 2015-33. The instructions to the Revised Form 3115 list 220 automatic change methods to which Rev. Proc. 2015-14 applies.

Form 3115

The IRS issued a draft of the revised Form 3115 in mid-2015, before completing the December revision of the form. Changes to the 2009 version of the form include:

  • Providing space for listing multiple designated accounting change numbers (DCNs) on the same form;
  • Expanding on the restrictions on filing for a method change while under audit;
  • For advance consent requests, requiring the taxpayer to provide a full explanation of the legal basis for the proposed method for the item being changed, as well as a detailed description of the facts;
  • A reference to the $50,000 limit for electing to include the entire Code Sec. 481(a) adjustment in income in one year; and
  • A reference to changes in depreciation method that asks whether the property will be in a single asset account, multiple asset account, or general asset account.

Filing

For an automatic change of method, taxpayers must file the original of their request with their return and must file a duplicate copy of their Form 3115 with the IRS in Covington, Ky. Prior to January 2016, Rev. Proc. 2015-13 required taxpayers to file the duplicate Form 3115 with the IRS’s office in Ogden, Utah. If a taxpayer filed its duplicate copy with either Ogden or Covington prior to April 20, 2016, the IRS advised that the taxpayer may file its original application or either the December 2009 or the December 2015 Form 3115.


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IRS Revises Form 3115 for Changes in Accounting Method (article)The form to notify the IRS of changes in accounting method recently underwent changes of its own....2016-04-04T18:24:00-05:00The form to notify the IRS of changes in accounting method recently underwent changes of its own.