Automatic accounting method change procedures updated.

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Automatic Accounting Method Change Procedure Updated......

What Is An Automatic Change In Accounting Method ???

For some accounting method changes, the IRS provides an automatic procedure for obtaining its consent to the change. Automatic consent procedures are only available for certain kinds of changes. In general, a taxpayer uses Form 3115 (Application for Change in Accounting Method) for an accounting method change.


The IRS on Friday updated the list of changes in the accounting method to which the automatic change procedures in Rev. Proc. 2015-13, as clarified and modified, apply (Rev. Proc. 2019-43).

Any method of accounting a taxpayer adopts must clearly reflect income. Under Sec. 446(e) and Regs. Sec. 1.446-1(e)(2)(i), unless otherwise provided, a taxpayer must secure the IRS's consent before changing its accounting method. To obtain the IRS's consent, taxpayers file Form 3115. Form 3115, Application for Change in Accounting Method, is an application to the IRS to change either an entity's overall accounting method or the accounting treatment of any item. Even when the IRS's consent is not required, taxpayers must file Form 3115.

Rev. Proc. 2019-43 amplifies, modifies, and mostly supersedes last year's list of automatic accounting method changes found in Rev. Proc. 2018-31.

A copy of Form 3115 must also be filed with the IRS National Office no earlier than the first day of the year of the change and no later than when the original is filed with the federal income tax return for the year of change. that is filed under the automatic change procedures of Rev. Proc. 2015-13, as clarified and modified by Rev. Proc. 2015-33, and as modified by Rev. Proc. 2017-59, and by Section 17.02 of Rev. Proc. 2016-1. Transition rules allow taxpayers who had a nonautomatic change in accounting method pending on Nov. 8, 2019, to notify the IRS that they want to have the automatic change procedures apply to their request if they are eligible to under Rev. Procs. 2019-43 and 2015-13.

The rules cover a diverse array of method changes, including advances made by a lawyer on behalf of a client, repair and maintenance costs, tenant construction allowances, and computer software expenditures.
The rules also cover changes from incorrect to correct depreciation methods, startup expenditures and organizational fees, capital expenditures, and a number of method changes under the uniform capitalization rules. 
What are the three types of accounting changes?
There are three types of accounting changes. The First Is A Change In Accounting Estimates, which Includes A Change In Depreciation Method. This Is Prospective change, meaning a material change in estimates is noted in Financial Statements and The change is made going forward.


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