Form 3115, Application for Change in Accounting Method, is how a business gets IRS consent to change when it reports an item of income or deduction. Most changes qualify for automatic consent with no user fee: you attach Form 3115 to a timely filed return and send a signed copy to the IRS in Ogden, Utah. Everything else needs advance consent from the IRS National Office, filed during the year of change with a $13,225 user fee.
This guide covers the Form 3115 rules in force as of October 2026: Rev. Proc. 2015-13 procedures, the Rev. Proc. 2025-23 list of automatic changes, the Section 481(a) catch-up adjustment with a worked example, and the new domestic research and experimental (R&E) expensing rules that took effect for 2025 tax years. Changing a tax year is a different filing on Form 1128, covered in our guide to adopting, changing or retaining a tax year.
Treasury regulations require a taxpayer who changes the method of accounting used in keeping its books to secure the consent of the Commissioner before computing income under the new method. Consent is required even when the new method is correct and the old one was wrong. Form 3115 is the request for that consent.
A method of accounting covers two things. One is the overall plan, such as the cash method or an accrual method. The other is the treatment of any material item, meaning any item that affects the timing of income or deductions. Depreciation lives, inventory costing, the timing of advance payments and the capitalization of repairs are all material items.
Timing is what separates a method change from an error. IRS Publication 946 says a taxpayer generally adopts a depreciation method by using a permissible method on its first return, or "by using the same impermissible method of determining depreciation in two or more consecutively filed tax returns." Once a method is adopted, an amended return will not fix it. The fix is a Form 3115 filed for the current year, with a Section 481(a) adjustment that catches up the prior years. Mathematical and posting errors are different: Publication 946 lists them among the situations an amended return can correct.
The common triggers for a Form 3115 filing in 2026 are:
Each change generally needs its own Form 3115, although Rev. Proc. 2015-13 requires or permits a single form for some concurrent changes.
The IRS publishes a list of changes that get automatic consent. The current list is Rev. Proc. 2025-23, which the IRS says "is effective for a Form 3115 filed on or after June 9, 2025, for a year of change ending on or after October 31, 2024." The Form 3115 instructions are still dated December 2022 and refer to the older list in Rev. Proc. 2022-14 "or any successor," so the revenue procedure controls where the two differ.
Rev. Proc. 2025-23 includes, among many others, changes from impermissible to permissible depreciation (section 6.01) and a change in overall method from the cash method to an accrual method (section 15.01). Each automatic change has a designated change number (DCN) that goes on line 1a of the form.
If a change is on the list, you must use the automatic procedures. The Form 3115 instructions state that "No user fee is required for a Form 3115 filed under the automatic change procedures." A taxpayer that files on time and follows the procedures is granted consent, subject to later review by the IRS National Office.
Any change not on the automatic list is a non-automatic request. The instructions say you must file it "during the tax year for which the change is requested, unless otherwise provided by published guidance," and recommend filing as early as possible in that year. The IRS normally acknowledges receipt within 60 days.
Under Rev. Proc. 2026-1, Appendix A, the user fee for a non-automatic Form 3115 is $13,225. Reduced fees apply to smaller filers who certify their gross income: $3,450 for gross income under $400,000, and $9,775 for gross income of $400,000 or more but under $10 million. Fees are paid through pay.gov.
| Point | Automatic change | Non-automatic change |
|---|---|---|
| Where it is listed | Rev. Proc. 2025-23 (as modified) | Not on the automatic list |
| User fee (Rev. Proc. 2026-1) | None | $13,225 standard; $3,450 or $9,775 reduced |
| When to file | With the timely filed return for the year of change, including extensions | During the year of change |
| Where the original goes | Attached to the federal return | IRS National Office |
| Second copy | Signed duplicate to IRS Ogden | Not applicable |
| Consent | Granted by following the procedures | Issued by the National Office |
For an automatic change, Form 3115 is filed in duplicate. The original is attached to the timely filed federal income tax return for the year of change, including extensions, and it does not need to be signed. The instructions then require you to "File a copy of the signed Form 3115 (duplicate copy) with the IRS National Office ... no earlier than the first day of the year of change and no later than the date the original is filed with the federal income tax return for the year of change."
The address chart sends that duplicate to Internal Revenue Service, Ogden, UT 84201, M/S 6111 by mail, or to 1973 N. Rulon White Blvd., Ogden, UT 84201, Attn: M/S 6111 by private delivery service. The signed duplicate may be a photocopy, and the instructions also allow it to be sent by fax. If the business has a tax year under examination, a copy also goes to the examining agent no later than the filing date.
For a CPA firm, the practical step is to mail the duplicate before or on the day the return is e-filed. Our overview of the 1040, 1065 and 1120 tax prep workflow shows where that step sits in a review cycle.
Non-automatic requests go to the IRS National Office, Attn: CC:PA:LPD:TSS, P.O. Box 7604, Benjamin Franklin Station, Washington, DC 20044, or by the secure fax and encrypted email options in the address chart. A filer that misses the deadline generally will not get an extension, though limited relief under Regulations section 301.9100 can be requested, with its own user fee.
Rev. Proc. 2015-13 sets the general procedures for both tracks. A key benefit is audit protection: the instructions explain that "In general, audit protection applies when an application for change in accounting method is granted," covering tax years before the year of change. Section 8.02 lists the exceptions.
For a business already under IRS examination, audit protection is available only in specific situations, including filing in one of two windows. In both, the method being changed must not be an issue under consideration in the exam on the date the form is filed.
Line 7b of the form is where the applicant checks the category that applies. A change filed under exam outside these exceptions can still be made, but the years before the year of change get no audit protection for that item.
Under 26 U.S.C. § 481(a), the year of change must include the adjustments "necessary solely by reason of the change in order to prevent amounts from being duplicated or omitted." The adjustment is the cumulative difference between the old and new methods as of the first day of the year of change.
The Form 3115 instructions set the spread period: "The section 481(a) adjustment period is generally 1 tax year (year of change) for a negative section 481(a) adjustment and 4 tax years (year of change and next 3 tax years) for a positive section 481(a) adjustment." When the applicant is under examination, a positive adjustment is spread over 2 tax years instead, unless the form is filed in the 3-month or 120-day window or another listed exception applies.
A calendar-year service company with no inventory switches from the cash method to an accrual method for its 2026 tax year under the automatic procedures. On January 1, 2026, its books show:
| Item at January 1, 2026 | Amount |
|---|---|
| Accounts receivable (income earned, not yet collected) | $180,000 |
| Accounts payable (expenses incurred, not yet paid) | ($65,000) |
| Accrued wages and other accrued expenses | ($15,000) |
| Net Section 481(a) adjustment | $100,000 positive |
Without the adjustment, the $180,000 of receivables and $80,000 of unpaid expenses would never reach the return. The $100,000 net amount is positive, so it is spread over four years:
| Tax year | Section 481(a) amount included |
|---|---|
| 2026 (year of change) | $25,000 |
| 2027 | $25,000 |
| 2028 | $25,000 |
| 2029 | $25,000 |
| Total | $100,000 |
If the company were under examination when it filed and no window or other exception applied, the same $100,000 would be spread over 2026 and 2027 at $50,000 each.
Now assume the same company also finds $48,000 of depreciation it never claimed on equipment used on its last three returns. That is a separate automatic change with its own Form 3115. The result is a negative Section 481(a) adjustment of $48,000, deducted in full in 2026. For 2026, the two adjustments together reduce taxable income by $23,000 ($25,000 included less $48,000 deducted).
The One Big Beautiful Bill Act (Public Law 119-21, July 4, 2025) added Section 174A, which lets businesses deduct domestic research or experimental expenditures in the year they are paid or incurred. Foreign research expenditures stay under Section 174 and continue to be amortized over 15 years. For the full background, see our guide to how the One Big Beautiful Bill Act changed Section 174.
The method change points that matter for Form 3115 come from Rev. Proc. 2025-28:
State conformity varies, so check each state return separately; our article on state conformity to OBBBA covers the coordination issues.
What is Form 3115 used for? Form 3115 is the Application for Change in Accounting Method. A business files it to get IRS consent to change its overall method, such as cash to accrual, or its treatment of a material item, such as a depreciation method or an inventory method.
Is there a fee to file Form 3115? Automatic changes carry no user fee. Non-automatic requests carry a $13,225 user fee under Rev. Proc. 2026-1, or $3,450 or $9,775 for smaller filers.
Where do I send the duplicate copy of Form 3115? For automatic changes, the signed duplicate goes to the IRS in Ogden, Utah (M/S 6111), no later than the date the return with the original is filed.
How long is the Section 481(a) adjustment period? A negative adjustment is generally taken in full in the year of change. A positive adjustment is generally spread over four tax years, or two tax years if the business is under examination and no exception applies.
Do I need Form 3115 to expense domestic R&E for 2025? The change to Section 174A for domestic expenditures is an automatic change, but Rev. Proc. 2025-28 lets taxpayers attach a statement in lieu of Form 3115 using DCN 273, and it waives the duplicate copy.
Madras Accountancy supports US CPA firms and businesses with tax preparation work, including Form 3115 preparation and Section 481(a) schedules that tie back to prior returns. This article is general information, so confirm the treatment for each client's facts. To discuss a method change, contact our team.
The section 4960 excise tax is 21% of nonprofit pay over $1M. From 2026 it covers all employees. See the medical carve-outs, Form 4720 and a worked example.
The paid family and medical leave tax credit is permanent from 2026. See the 12.5% to 25% rates, the premium option, the 6-month rule and how Form 8994 works.
Opportunity zones become permanent in 2027 under the One Big Beautiful Bill. See the new deferral, rural bonus, and the 2026 handoff.
