At the end of 2018, IRS began a slow roll-out of new procedures and requirements for method changes. All taxpayers and tax preparers should note the new rules and be careful when filing method change requests.
New filing fees
Every year the IRS determines appropriate fees for various services in the first revenue procedure for the year. This year’s version, Rev. Proc. 2019-1, increased the user fee for Non‑automatic Forms 3115, Application for Change in Accounting Method from $9,500 to $10,800. The fee for identical changes in method of accounting (filed by additional applicants on the same non-automatic Form 3115) increased from $200 to $230 per applicant. Letter ruling requests for extensions of time to file a Form 3115 under section 301.9100-3 increased from $10,000 to $11,800.
New Form 3115 requirements
Along with the increased fees, the IRS released a revised version of the Form 3115, which reflects changes introduced by recent tax legislation (commonly referred to as the Tax Cuts and Jobs Act, or TCJA). The most notable changes involve Schedules A and B. The Schedule A – used for changes in overall method – was updated to reflect the new small taxpayer method changes. The Schedule B – used to change to the deferral method for advance payments – was updated to reflect section 451(c) generally replacing Rev. Proc. 2004-34. Note that not all software platforms have integrated the revised Form 3115, so be cautious when relying on tax prep software and look for “Rev. December 2018” in the top left corner.
New filing locations
The IRS also released instructions to the Form 3115, and include one major update: automatic Forms 3115 must now be mailed to the service center in Ogden, Utah instead of Covington, Kentucky. The appropriate addresses are included in the table below. In addition to the new mailing locations, the instructions generally clarify the changes to the Form 3115.
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Non-automatic change requests: |
Automatic change requests (Form 3115 copy): |
Delivery by mail: |
Internal Revenue Service |
Internal Revenue Service |
Delivery by private delivery service: |
Internal Revenue Service |
Internal Revenue Service |
Takeaways
Any time the price of a non-automatic method change increases, the value of finding a way to make automatic changes increases in turn. Taxpayers should consult their tax advisors to plan their accounting methods and take advantage of opportunities to make automatic changes before they require costly non-automatic filings. With new mailing locations and Form 3115 requirements, it is important to avoid falling into the trap of over-relying on SALY (same as last year) when it comes to filings in the post-TCJA world. Given the ever-shifting landscape of tax law, taxpayers are encouraged to consult their tax advisors on any filing to stay up to date on the latest requirements.
