Taxpayers should be proactive when filing accounting method changes.

• Author: Fitzpatrick, Ellen

A sigh of relief usually follows when a tax practitioner informs a client that a particular accounting method change request can be filed under the automatic accounting method change procedures. That is because Rev. Proc. 2008-52, [section]6.02(3), allows a taxpayer to file an automatic accounting method change request as late as the extended due date for the taxpayer's federal income tax return for the year of change.

A taxpayer does not, however, have to wait until the extended due date of its tax return to do so because Rev. Proc. 2008-52 also allows taxpayers to file an automatic accounting method change request as early as the first day of the year of change. While it is understandable why taxpayers (and their service providers) routinely wait until the last minute to complete and file automatic accounting method change requests, there are numerous reasons to file such requests as early as possible.

Among these reasons is the possibility that a taxpayer will come under IRS examination before it has the opportunity to file its accounting method change request. For the same reason, taxpayers planning on filing nonautomatic accounting method change requests (under Rev. Proc. 97-27) need not wait until the last day of their tax years to file accounting method change requests.

Both Rev. Proc. 2008-52 and Rev. Proc. 97-27 provide that a taxpayer under examination may file a request for a change in accounting method only if it meets the requirements of: (1) the 90-day window (described below); (2) the 120-day window; or (3) the director consent provisions. In order for a taxpayer to use either the 90-day or the 120-day window, the issue for which the accounting method change is being requested must not be "an issue under consideration." The determination of whether an issue is under consideration may present significant challenges.

This item discusses the difficulties that arise when trying to determine whether an issue is under consideration for purposes of the 90-day or 120-day windows. Specifically, it examines a recently released technical advice memorandum that illustrates the complex nature of this problem in the context of a nonautomatic accounting method change request.

Issue Under Consideration

The IRS National Office discussed the "issue under consideration" topic in a recent technical advice memorandum (TAM 200843031). The IRS stated that a taxpayer was not allowed to file a request for a nonautomatic change in method of accounting...