Form 3115, Application for Change in Accounting Method, is a key IRS filing used by taxpayers to implement changes in how income and expenses are recognized for tax purposes. These changes may relate to a taxpayer’s overall method of accounting (such as transitioning from the cash method to the accrual method, or vice versa) or to the treatment of specific material items that impact the timing of income or deductions (such as depreciation or revenue recognition).
Accounting method changes are governed by IRS procedural guidance, including Revenue Procedure 2015-13 and Revenue Procedure 2025-23, which outline the requirements, eligibility, and filing procedures for taxpayers seeking to make a change. These resources can be accessed directly below:
There are two main types of method changes:
The IRS publishes a list of common changes that qualify for automatic consent. For these, Form 3115 is filed with your tax return for the year of change, and a copy is sent to the IRS. No user fee is required.
Changes must be made in the current tax year; you generally cannot retroactively change your method for a prior year by amending a return. Most changes require a calculation of a Section 481(a) adjustment to prevent duplication or omission of income or deductions. This adjustment is generally spread over four years for positive adjustments (unfavorable) or taken in one year for negative adjustments (favorable). A listing and description of the most commonly filed accounting method changes is provided below.
Changes to the timing of income recognition for advance payments, including changes to comply with §451(b) and (c), the AFS (applicable financial statement) income inclusion rule, and the deferral method for advance payments. The most common example of a revenue recognition change is for advance payments and/or deferred revenue where the taxpayer recognizes revenue for financial statement purposes in a later period (e.g. gift cards, warrant contracts, subscriptions, services, etc.).
Scroll to see Common
Accounting Method Change Filings
Changes to the timing of income recognition for advance payments, including changes to comply with §451(b) and (c), the AFS (applicable financial statement) income inclusion rule, and the deferral method for advance payments. The most common example of a revenue recognition change is for advance payments and/or deferred revenue where the taxpayer recognizes revenue for financial statement purposes in a later period (e.g. gift cards, warrant contracts, subscriptions, services, etc.).
Source Advisors partners with CPA firms and their clients to identify, evaluate, and implement accounting method changes in a manner that is efficient, technically sound, and fully compliant with IRS requirements. Our team assists in determining whether a method change is appropriate, identifying whether the change qualifies as automatic or non-automatic, and preparing all required Form 3115 filings in accordance with applicable guidance, including Revenue Procedure 2015-13 and Revenue Procedure 2025-23.
In addition to preparation and filing, Source Advisors supports clients with the calculation of Section 481(a) adjustments and provides insight into the potential tax impact of each change. Our team brings significant experience in accounting methods, including professionals who have served in leadership roles within Big Four national accounting methods practices, allowing us to deliver practical, high-quality solutions tailored to each client’s facts and circumstances.
We welcome the opportunity to collaborate with your team—please contact us to discuss how we can assist with current or prospective accounting method change opportunities.
