IRS modifies rules for filing accounting method changes and procedures for taxpayers under examination.

• Author: Chou, Yuan

On Jan. 16, the IRS released Rev. Proc. 2015-13, which provides the exclusive procedures for taxpayers to obtain both automatic and advance consent for a change in method of accounting. Rev. Proc. 2015-13 amplifies, clarifies, modifies, and supersedes, in part, Rev. Proc. 2011-14, the previous exclusive revenue procedure for all automatic consent accounting method changes. This revenue procedure also clarifies, modifies, and supersedes Rev. Proc. 97-27, the longstanding revenue procedure for advance consent (or nonautomatic) accounting method changes.

The highlights of Rev. Proc. 2015-13 are the addition of several new procedural rules for filing method changes, including, among other things, significant changes for taxpayers under examination to file method changes, shortened Sec. 481(a) adjustment periods, and a new requirement to mail the automatic change copy to the IRS office in Ogden, Utah, rather than the IRS National Office. Concurrently with the release of Rev. Proc. 2015-13, the IRS also released Rev. Proc. 2015-14, which contains the updated list of automatic accounting method changes. This revenue procedure adds new terms and conditions to existing automatic changes and provides for several new automatic changes.

Rev. Procs. 2015-13 and 2015-14 are effective for Form 3115, Application for Change in Accounting Method, requests filed on or after Jan. 16,2015, for a year of change ending on or after May 31, 2014. However, the IRS provided a modified transition rule that permits a taxpayer to file an automatic Form 3115 request for a tax year ending on or after May 31,2014, and on or before Jan. 31, 2015, under either Rev. Proc. 2011-14 or the new Rev. Proc. 2015-13. Rev. Proc. 2015-13 modifies Rev. Procs. 2011-14 and 97-27 in many areas, but the rest of this item highlights the more significant developments.

Taxpayers Under Examination

Before the issuance of Rev. Proc. 2015-13, a taxpayer that was under IRS examination as of the date the taxpayer filed Form 3115 generally could not file the change unless it filed within the 90-day or 120-day window, obtained director consent, filed an automatic change that lacked audit protection, or filed for an issue pending. In many cases, these limitations severely restricted taxpayers from changing from impermissible to permissible methods of accounting. Now, under Rev. Proc. 2015-13, a taxpayer under examination is able to file a Form 3115 at any time while under examination. However, the...