Form 3115, Application for Change in Accounting Method, is the IRS form businesses file to request or report a change in how they recognize income or expenses for tax purposes — such as switching from cash to accrual accounting or correcting a depreciation error.
Depending on the type of change, it's filed either automatically with your tax return or as a standalone application requiring IRS approval before the change takes effect.
What Is Form 3115 Used For?
Form 3115 is used any time a business changes its overall accounting method (cash vs. accrual) or its treatment of a specific item that affects the timing of income or deductions — like depreciation, inventory costs, or revenue recognition.
Once a business has used a method consistently, the IRS requires a formal filing before switching, even if the original method was incorrect.
When Do You Need to File Form 3115?
You likely need to file Form 3115 if any of the following apply to your business:
- An asset was never depreciated, or was depreciated using the wrong method or recovery period
- A disposed-of asset is still on the depreciation schedule ("ghost assets")
- Repairs and improvements haven't been reviewed against the tangible property regulations
- Revenue recognition doesn't match how the business actually gets paid (subscriptions, deposits, gift cards)
- Gross receipts have crossed a threshold requiring a shift between cash and accrual accounting
Automatic vs. Non-Automatic Changes
Automatic changes are pre-approved by the IRS for a published list of common scenarios. Form 3115 is filed with the tax return for the year of change with no advance approval or fee required.
Non-automatic changes cover everything else. These require a standalone application to the IRS National Office, a user fee, and IRS approval before the change is implemented, generally filed before the end of the tax year in question.
Filing the wrong type or missing the non-automatic deadline is one of the most common and costly mistakes businesses make with this form.
What Is a Section 481(a) Adjustment?
A Section 481(a) adjustment accounts for the difference between the old and new accounting methods across prior years, preventing income or deductions from being double-counted or missed.
Unfavorable adjustments (which increase taxable income) are typically spread over four years; favorable adjustments (which decrease it) are usually taken entirely in the year of the change.
What Information Does Form 3115 Require?
A complete filing generally includes:
- The specific type of accounting method change requested
- The legal basis for the change
- Supporting calculations, including the Section 481(a) adjustment
- Documentation establishing eligibility
Requirements are governed by IRS guidance, including Revenue Procedure 2015-13 and Revenue Procedure 2025-23, and vary based on the type of change and entity involved.
Want to see what a completed filing actually looks like? Check out our annotated example of Form 3115.
FAQ
Does every business need to file Form 3115?
Only businesses changing an accounting method they've already been using consistently. New businesses selecting a method for the first time typically don't need it.
Can Form 3115 be filed late?
Automatic changes are tied to your tax return deadline (including extensions). Non-automatic changes generally must be filed before the end of the tax year of the requested change — late filing usually means waiting until the following year.
Who can help prepare Form 3115?
Because of the technical calculations and IRS procedural requirements involved, most businesses work with a tax professional experienced in accounting method changes rather than filing independently.
Is a Method Change in Your Future?
If you recognize your business in any of the scenarios above, it's worth a conversation before your next return is filed — method changes are almost always more favorable when planned for in advance.
Source Advisors helps CPA firms and businesses determine whether a change applies, classify it correctly, calculate the Section 481(a) adjustment, and prepare the filing.
