Accounting Method Change Relief Issued for Small Business Taxpayers


Administrative Relief

The IRS released Revenue Procedure 2015-20 (“Procedure”) on February 13, 2015, which provides administrative relief to small business taxpayers.  This Procedure allows small business taxpayers adopting the tangible property regulations to make accounting method changes on a prospective basis in tax years starting on or after January 1, 2014.

A “small business taxpayer” is defined as a taxpayer with one or more separate and distinct trades or businesses with total assets of $10 million or less, OR average gross annual receipts of $10 million or less for the prior three taxable years.  No aggregation or controlled group rules are provided for purposes of defining a small business taxpayer.  Of special note, the definition of a small business taxpayer looks to a trade or business level of applying the gross receipts and assets test.

Small business taxpayers have the option to make accounting method changes without filing a separate Form 3115 or statement.  This relief is only available for the 2014 tax year.

Cautions to Consider

Although small business taxpayers may welcome the relief and simplified process, they will not receive audit protection by following this process.  The IRS will be able to audit and adjust prior years using the final tangible property regulations.

Small business taxpayers using this Procedure will not be able to apply the late partial disposition election for disposals prior to January 1, 2014.

A small business taxpayer that would like to use this Procedure and previously filed a federal return for 2014, with a Form 3115, is permitted to withdraw its Form 3115 through the filing of an amended return on or before the extended due date of the tax return.

Small business taxpayers should carefully consider the benefits and risks associated with adopting the administrative relief from the new Procedure.

We can help you determine how this Procedure would affect your accounting methodology. Contact us if you would like to discuss further, or need assistance filing an amended return.

About the Authors

John E. Jenkins
John E. Jenkins
Partner, Taxation Services
Robert M. Burak
Robert M. Burak
Partner Emeritus, Taxation Services


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