FORM 3115 ELECTION TO CHANGE ACCOUNTING METHOD

I made a form 3115 election for a client to report income on a cash basis. In addition to filing the form I provided to the IRS all of the applicable back up and schedules. I mailed everything timely by certified mail about 2 months ago. I read the election is automatic but I have not received any correspondence from IRS requesting additional information or an approval of the election. I also read that the form 3115 has to be attached to the first tax return reflecting the change.

Do I have to receive notification from IRS concerning the approval of the election or is it automatic ?

With automatic changes, you only receive correspondence if there is a problem. Attach a copy of the 3115 to the timely filed return for the year of change and you should be good.

thanks

Have been reading up on the new repair regulations in preparation of this season. Have picked up many good suggestions from this board. Planning on doing DMSH & STSH and well as a the M&S automatic changes. I have been unable to find guidance on being able to report more than one accounting change on one 3115. I noticed that the form 3115 is 8 pages. Interested in any comments by CPA's who might decide to file on paper rather than efile. Also, for those who use ProSeries, is it possible to create multiple 3115, assuming you need one 3115 for each accounting method change, and can't combine on line 1a, page 1 of Form 3115.

A lighter question, if the repair regulations, even temporary came out February, 2014, one would think that Form 3115 has been modified, why would the IRS date under Form 3115 still be Rev. 9/2009. My software currently has this date on the top left when I print this form on 2014.

The guidance you're looking for is in Rev. Proc. 2014-16. The Form 3115 is not an annually updated form. Given that the Service is working on updating both Rev. Procs. 97-27 and 2011-14, it probably never occurred to them that the out-of-date instructions and form would be an issue. For the form itself, being five years old is not an issue. The instructions are another story.

Has anyone started filling out their 3115 for the new Tangible Property Regulations? I've been running some simulations in Lacerte so that we can train our staff, and it's creating more questions than answers. 1. In the box to indicate the type of accounting method change being requested, the options are depreciation, financial products or other. I selected Other, and then specified "Tangible Property Regulations. 2. In Part 1 Line 1a, Lacerte has not updated their list of available change numbers because the IRS has not updated the form instructions. I selected the Other box and then listed all the change codes I thought might be relevant, including 184, 186 and 192. 3. Part 2 line 12 is one of the lines required to be filled out. I'm not sure what they are looking for, but this is my best guess a) items being changed TREATMENT OF AMOUNTS PAID TO ACQUIRE, PRODUCE OR IMPROVE TANGIBLE PROPERTY b) applicant's present method ??? DO THEY WANT THE PRIOR REV PROC LISTED HERE? c) applicant's future method ??? CURRENT REV PROC 4. I've seen a few references to Rev Proc 2014-54, which outlines method changes 199-207. It looks 205 & 206 replace 177 & 178. I don't think we are going to go back to prior years make adjustments for the partial asset disposition, but just take advantage of it going forward. Any comments or guidance would be appreciated. Thanks.

Has anyone one seen sample language for the 3115 (or a boilerplate 3115) related to the tangible property regulations?

We too, are working ahead and trying to develop a template to train staff for the proper presentation of Form 3115.

In Section 1a, i thought it would be Depreciation method that is being changed for 186 & 187 (for M & S). I found this in the 38 page CCH analysis.

Materials and supplies are defined to include components acquired to “improve” a unit of property. Nevertheless,
the repair regulations provide that materials and supplies used to improve property are not treated as materials and
supplies and must be capitalized and depreciated as part of the cost of the improvement,rather than deducted in the year
used or consumed (Reg. §1.263(a)-3(c) (2)).

We too, are working ahead and trying to develop a template to train staff for the proper presentation of Form 3115.

In Section 1a, i thought it would be Depreciation method that is being changed for 186 & 187 (for M & S). I found this in the 38 page CCH analysis.

Materials and supplies are defined to include components acquired to “improve” a unit of property. Nevertheless,
the repair regulations provide that materials and supplies used to improve property are not treated as materials and
supplies and must be capitalized and depreciated as part of the cost of the improvement,rather than deducted in the year
used or consumed (Reg. §1.263(a)-3(c) (2)).

I didn't choose Depreciation because I'm not changing the "method of Depreciation," I'm changing the capitalization policy. I would be using the same method of depreciation, regardless of whether it is was done in 2010 or 2014. It was my understanding that changing the "method of depreciation" meant changing from 5 years to 7 years, for example.

I've filled out a sample 3115 that I would like for you guys to get the knives out and cut it up. However, I don't know the procedure to copy and paste it. My method isn't working. Any suggestions would be appreciated.

Bill Griffin

Hi all,
There is some excellent CPE available on the Repair Regs & in filling out Form 3115 available from NATP:
"The Nitty-Gritty of the Final Repair Regulations" & "The ABCs of Form 3115" both as Webinars.

Also wanted to mention that on the Form 3115, for the section that says "Check the appropriate box to indicate the type of accounting method change being requested", do NOT check the box "Other". As mentioned in the Form 3115 webinar (confirmed by the Form 3115 instructions), this box is reserved for Advance Consent requests. For the repair regs, we are applying for an Automatic Change request. This section should be left blank for repair reg changes.

The Form 3115 NATP webinar gives an example of a filled out Form 3115 form for Repair Regs changes, as well as for other accounting method changes.

Here are the links to the webinars:
http://www.natptax.com/EventsAndEducati ... ruary.aspx

http://www.natptax.com/EventsAndEducati ... ember.aspx


Riki

So has there been a final determination that Form 3115 is required for every taxpayer who claims depreciation expense? I remember there was a debate on it in another thread.

Does this help?

http://www.uscostsegregation.com/sample-irs-form-3115/

I don't know if any of the major tax software programs will allow the entry of multiple automatic change codes on a single Form 3115, but it appears that this is permissible. I will be submitting Form 3115's on certain clients in relation to the new repair and capitalization rules. I use Lacerte and their program will not allow this. I have tried it on the input screen and also called them. They indicate that they have no plan to change their program at this time. I was curious as to how other Lacerte users plan on handling this issue for 2014 filings? Could always prepare separate 3115's for each change, or have system print out the 3115 without code info and manually enter codes and file the return by paper. Any other thoughts? Thanks!

I am not even using Lacerte to do the 3115, I downloaded the form from IRS, filled out the info that will be the same on most of my clients, saved it in Adobe and I'll just change the name & other info that is client specific and send it as a PDF attachment.

Most software programs won't allow you to enter more than one change number on line 1(a), so what I'm doing is entering them on line 1(b) with a description such as "Change Nos. 184, 186, 187, 192"

Both suggestions are certainly viable. I had thought about entering additional change codes on 1(b). Thanks for the input!

Granted a copy of the Form 3115 for the Tangible Property Regs would be included with the applicable tax return, but I have seen some language as to whether to submit a signed copy of the Form 3115 to the Ogden IRS office rather than to the National IRS office. Any thoughts on this?

As of 1/16/2015, the mailed copy of all automatic consent method changes go to Ogden.

Thanks, Brian! Just curious, was this per some Notice or Rev Proc? I have not seen anything in any alerts.