Automatic Accounting Change Method Procedures for All-Events Test and Advance Payment Deferral
Taxpayers may use the automatic consent procedures to change accounting methods to comply with the recent proposed regulations described in the previous article.
The proposed regulations provide rules for:
- inclusion in gross income under the all-events test
for taxpayers with an applicable financial statement (AFS); and
- use of the deferral method for advance payments for taxpayers with or without an AFS.
Certain qualifying taxpayers may apply for a change to comply with the proposed regulations without filing a Form 3115, Application for Change in Accounting Method.
The accounting change procedures for inclusion in gross income for taxpayers with an AFS generally apply to taxpayers with an AFS that want to:
- change to a method of accounting that treats an item of gross income as meeting the all-events test no later than when the item is taken into account as revenue in its AFS under Internal Revenue Code (IRC) Section 451(b)(1)(A);
- in certain cases, allocate the transaction price to performance obligations under IRC Section 451(b)(4);
- change to a method of accounting that complies with Proposed Regulation Section 1.451-3; or
- change to a method of accounting that complies with Proposed Regulation Section 1.451-8(c).
The procedures also apply to taxpayers who do not have an AFS and that want to change to a method of accounting that complies with Proposed Regulation Section 1.451-8(d).
In addition, the procedures apply to a change in AFS in order to apply certain revenue recognition methods of accounting.
Pending Nonautomatic Applications
The IRS will return any Form 3115 requesting a change in method of accounting available under this revenue procedure that:
- was filed on or before September 9, 2019, under the non-automatic procedures for a tax year beginning after December 31, 2017; and
- is pending with the National Office on September 9, 2019.
The National Office will send a letter to the taxpayer acknowledging the return of the Form 3115, and will return the user fee submitted with the form. A timely resubmitted Form 3115 will be considered filed as of the date the taxpayer originally filed the Form 3115 under the nonautomatic change procedures.
For more information about this article, please contact our tax professionals at email@example.com or toll free at 844.4WINDES (844.494.6337).