Form 3115: Application for Change in Accounting Method

Who Files Form 3115

Any taxpayer (individual, business, or trust) that wants to change a method of accounting it has used on at least two filed returns, or that must correct an impermissible method. Common filers include businesses switching between cash and accrual, real estate owners catching up missed depreciation after a cost segregation study, and active securities traders who have made a Section 475(f) mark-to-market election and must change to the mark-to-market method for the election year.

What Form 3115 Reports

Form 3115 identifies the present method, the proposed method, the year of change, and the Internal Revenue Code authority for the change, and it computes the Section 481(a) adjustment that captures the cumulative difference between the old and new methods so income is neither doubled nor skipped. Most changes are automatic changes that do not require a user fee and are identified by a designated change number (DCN); the trader Section 475(f) mark-to-market change is DCN 64. Automatic changes follow the general procedures of Rev. Proc. 2015-13 and the current annual list (Rev. Proc. 2025-23); changes not on the automatic list require advance IRS consent and a user fee. A positive Section 481(a) adjustment is generally spread over four years, while a negative one is generally taken entirely in the year of change.

Key Deadlines

• Automatic change: file the original Form 3115 with the timely filed (including extensions) return for the year of change, and send a signed duplicate copy to the IRS in Ogden, UT
• Trader Section 475(f) election: the separate election statement is due by the unextended due date of the prior-year return (April 15), then Form 3115 is filed with the election-year return
• Non-automatic (advance consent) change: file during the year of change, before the return is filed, with the applicable user fee

Common Mistakes

• Changing a method on the return without ever filing Form 3115, which leaves the taxpayer on an impermissible method
• For traders, filing the Section 475(f) election statement on time but forgetting the required Form 3115 for the election year
• Miscalculating or omitting the Section 481(a) adjustment, or taking a positive adjustment all at once instead of over four years
• Confusing an automatic change (no fee) with a non-automatic change that needs advance consent and a user fee
• Failing to send the duplicate copy to the IRS, which can invalidate an otherwise timely automatic change

Best Practices

• Confirm your current method in writing before filing; many taxpayers assume cash basis but have hybrid or impermissible elements.
• Check the current revenue procedure (Rev. Proc. 2025-23 and Rev. Proc. 2015-13) to confirm whether your change is automatic and which DCN applies.
• Model the Section 481(a) adjustment in advance; a large positive adjustment can spike income even spread over four years.
• Keep proof of both the original (with the return) and the duplicate copy filing, including the mailing or e-file record.
• For traders, calendar the two-step deadline: the prior-year-due-date election statement and the election-year Form 3115 are separate and both are required.

Source: Official Form 3115 information at IRS.gov