United States

IRS releases draft of revised Form 3115

TAX ALERT  | 

On July 15, 2015, the IRS released a draft of a revised Form 3115, Application for Change in Accounting Method. The draft Form 3115 provides revisions that incorporate modifications and additions to the accounting method change procedures of Rev. Proc. 2015-13 and Rev. Proc. 2015-14. The draft Form 3115 is expected to be finalized for use by December 2015.

The last revision to Form 3115 was December 2009. While the draft Form 3115 includes multiple revisions and updates, some noteworthy modifications 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 non-automatic method changes (replacing the current Form 3115's requirement to provide a legal basis for only non-automatic method 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

Implications

Until the IRS finalizes the draft Form 3115, taxpayers must continue to use the existing Form 3115. When finalized, the revised Form 3115 will be helpful for taxpayers that must disclose certain information under the new procedures of Rev. Proc. 2015-13. However, since taxpayers are permitted to continue filing automatic method changes for tax years beginning before Jan. 1, 2015, under the procedures of Rev. Proc. 2011-14, the current Form 3115 should still generally provide the necessary information for the application. Taxpayers should make sure to work with their tax advisors to determine the appropriate and most optimal procedures to follow when requesting one or more changes in accounting method and to ensure that the Form and accompanying statements are properly prepared and filed.

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