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Draft of Revised Form 3115 Issued by the IRS

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Jul 28th 2015
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A draft version of a revised Form 3115, Application for Change in Accounting Method, was issued by the IRS on July 15. This is the first time the form has been revised since December 2009.

The draft Form 3115 includes revisions that incorporate modifications and additions to the accounting method change procedures of Revenue Procedure 2015-13 and Revenue Procedure 2015-14, according to a Tax Alert released by McGladrey LLP.

Rev. Proc. 2015-13, which was issued in January, updates and revises the general procedures under § 446(e) of the Internal Revenue Code and § 1.446-1(e) of the income tax regulations to obtain the advance and automatic consent to change a method of accounting for federal income tax purposes.

Rev. Proc. 2015-13 added new procedural rules for filing accounting method changes, including significant changes for taxpayers under examination. It also shortened the Sec. 481(a) adjustment periods and added a new requirement that Form 3115 be filed with the IRS office in Ogden, Utah, instead of with the IRS National Office, according to a Tax Adviserarticle.

Rev. Proc. 2015-14, also issued in January, provides the list of automatic changes to which the automatic change procedures in Rev. Proc. 2015-13 apply.

According to McGladrey, some of the more noteworthy modifications in the draft Form 3115 include:

  • The ability to list multiple automatic method change numbers on a single Form 3115 (for multiple method changes that are permitted to be requested on one Form 3115).
  • Revised questions to take into account the new eligibility rules of Rev. Proc. 2015-13 (including the election to recognize a positive section 481(a) adjustment in full in the year of change for de minimis adjustments of less than $50,000, or where an eligible transaction occurs during the year of change or in the subsequent year).
  • A requirement to provide the legal basis for any proposed method of accounting for both automatic and nonautomatic method changes (replacing the current Form 3115's requirement to provide a legal basis for only nonautomatic changes).
  • A requirement to indicate whether property subject to a change in depreciation (for which Schedule E of the Form 3115 is required) will be included in a single, mass, or general-asset account.

Until the IRS finalizes the draft Form 3115, taxpayers must continue to use the existing Form 3115. The draft Form 3115 is expected to be finalized for use by December, according to McGladrey.

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