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Preparing Form 3115 for Changes in Accounting Method: Reporting the Section 481(a) Adjustment

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, November 16, 2021

Recorded event now available

This course will walk tax preparers through the preparation of Form 3115, Application for Change in Accounting Method, common scenarios that require its filing, and the corresponding recognition of the adjustment under Section 481(a).

Description

Whether by new regulations, accounting method changes, or error, numerous reasons necessitate filing Form 3115 and making the corresponding Section 481(a) adjustments. Generally, if an impermissible method of accounting is used for more than one year, it must be corrected by a change of accounting method. Since a negative adjustment (a reduction in income) is taken immediately, it can generate significant cash flow for a business in the year of change. A positive Section 481(a) adjustment is taken over four years.

Some changes are automatic; these are listed regularly in a Revenue Procedure issued by the IRS (Rev Proc 2019-43 or its successor). These automatic changes provide for certain administrative efficiencies by not requiring consent by the Commissioner prior to making the change in method and not requiring a filing fee paid to the IRS.

Non-automatic changes require IRS consent before changing and payment of a filing fee to the IRS. Both types require the taxpayer to file Form 3115, Application for Change in Accounting Method. Tax practitioners working with businesses need to understand how to complete Form 3115 and report Section 481(a) adjustments on taxpayers' returns.

Listen as our panel of federal income tax experts explains what constitutes a change in accounting method, completing Form 3115, and calculating the necessary adjustment under Section 481(a) for businesses and their advisers.

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Outline

  1. Changes in accounting method: an overview
  2. Circumstances requiring a change in accounting method
  3. Preparing Form 3115
  4. Automatic and nonautomatic changes
  5. Section 481(a) adjustment
  6. Recent legislative changes
  7. Best practices

Benefits

The panel will cover these and other important issues:

  • What constitutes a change in accounting method and requires filing Form 3115?
  • How are Section 481(a) adjustments calculated and made?
  • How to deal with method changes required to be reported on a cut-off basis.
  • What recent updates require filing Form 3115?

Faculty

Corcoran, Ryan
Ryan Corcoran
Senior Manager - Washington National Tax
RSM US

As part of RSM’s Washington National Tax practice, Mr. Corcoran specializes in federal accounting methods areas...  |  Read More

Parra, Erica
Erica Parra
Manager - Washington National Tax
RSM US

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 |  Read More