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IRS issues new procedures for filing accounting method changes

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Tax Hot TopicsThe IRS recently released two Revenue Procedures (Rev. Procs. 2015-13 and 2015-14) that provide a comprehensive update to the procedures for filing both automatic and non-automatic accounting method changes. Rev. Proc. 2015-13 updates and consolidates the general procedural guidance for automatic and non-automatic method changes, replacing Rev. Proc. 97-27 (prior non-automatic procedures) and Rev. Proc. 2011-14 (prior automatic procedures). Rev. Proc. 2015-14 provides a comprehensive list of all automatic method changes, including all those that were formerly included in the appendix of Rev. Proc. 2011-14.

The more than 500 pages of guidance issued by the IRS also make some changes to when and how taxpayers are eligible to file method changes, particularly when taxpayers are under exam. For example, if a method change is filed by a taxpayer that is under exam, there are only certain circumstances under which audit protection will be provided. The IRS has changed the so-called 90 day window at the beginning of the year to a three month window later in the taxable year. Additionally, the IRS has modified the spread period of the Section 481(a) adjustment in certain circumstances.

The updates to the methods of accounting in Rev. Proc. 2015-14 that are now automatic changes include, for example, change to no longer defer revenue under Treas. Reg. Sec. 1.451-5, the use of the U.S. Ratio Method for UNICAP, and the timing of deduction for severance and sick pay.

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Sharon Kay
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E sharon.kay@us.gt.com

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