AICPA asks IRS to revise accounting method change procedures

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The American Institute of CPAs has sent a letter to the Internal Revenue Service with three recommendations on the accounting method change procedures for business taxpayers.

A 2015 IRS revenue procedure, Rev. Proc., 2015-13, Changes in Methods of Accounting, details the procedures for taxpayers to obtain automatic changes in method of accounting and get the IRS’s consent for an accounting method change.

In its letter Wednesday, the AICPA urged the IRS to make some modifications to those procedures, including revising the three-month window period to refer to the two months before and one month after the extended due date of the taxpayer’s return so it can be more consistent with the intent of the three-month window;

The AICPA also asked the IRS to clarify a special rule in the 2015 revenue procedure for a controlled foreign corporation or 10/50 corporation refers to the three taxable years immediately before the tax year of the change.

In addition, the Institute wants the IRS to revise the revenue procedure to allow taxpayers to ask to revise the year of change for a non-automatic Form 3115, Application for Change in Accounting Method, on or after the first day of the third month after the month in which their federal income tax return is due (excluding extensions) for the original year of change requested on their Form 3115.

“This delay in the determination of whether a taxpayer must incorporate a pending method change into a current tax return will add unnecessary uncertainty and complexity for taxpayers,” wrote AICPA Tax Executive Committee chair Annette Nellen.

The AICPA also wrote to the IRS last November about the same revenue procedure, with various recommendations would reduce the administrative burden for the IRS while encouraging voluntary tax compliance. They included providing a single overall “issue under consideration” standard for taxpayers under examination; restoring a 90-day window; providing back-year audit protection and a four-year spread of a positive Section 481(a) adjustment when new guidance is issued; removing the additional conditions for exceptions to audit protections for controlled foreign corporations; allowing a longer period for automatic relief for filing the Covington, Kentucky copy of Form 3115 for automatic accounting method changes; and including other filing procedures to minimize administrative compliance burdens.

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