The draft Form 3115 has been released by the IRS
The good news is that this is a draft form and cannot be used for tax year 2014 nor any 2015 year method change filings. The current form issued in December of 2009 remains the proper form version to use. This is good news in that we can prepare and hold the 2014 TPR method changes without a concern that the IRS will require us to employ a new form. Here are some of my observations on this this form, as this is a draft and cannot be used currently, I am not going to go into a greater detailed analysis at this time than the following main points:
a. From my knowledge there does not appear to be a short form version of the Form 3115 nor a question within the form to indicate that the taxpayer is a qualified taxpayer (i.e. qualifies under the $10M threshold).
i. While there appears that there will be no separate Short Form 3115, the taxpayer would just not answer the questions that the IRS previously stated were not required to be answered. The problem is that the new form question numbers have changed when compared to the current Form 3115. The IRS will have to update its revenue procedures for the qualified (i.e. under the $10M threshold) taxpayers reduced filing.
c. We anticipate that the form will be finalized and will need to be employed for Form 3115 submissions December 15, 2015and after. Until that time, continue to use the December 2009 version to submit your TPR 3115s.
d. The new draft form removes any references to any revenue procedures. As such, the form will not become immediately out of date when the IRS updates its method filing revenue procedures. The current revenue procedures to use are RP 2015-13 and RP 2015-14 for automatic methods.
e. The IRS has fixed many of its inherent flaws in its current Form 3115 when it made statements in the that form about “cease to engage in the trade or business” and “therefore cannot file the Form 3115”.
f. The area to add your DCNs is greatly expanded and individual numbers can be entered into up to 10 different DCN lines. This will make concurrent method filings easier to fit on the Form 3115.
g. There is a specific question asking about the “eligibility rules” and its restrictions that would prohibit the taxpayer from being able to file a method change request.
h. The restrictions about filing a method change while under an IRS audit are expanded.
i. It appears that new types of “statements” are required, such as why the taxpayer will not follow the requested method change for its books and records and whether audit protection applies to the requested change. We anticipate that the details of those “statements” will come out when the IRS issues the updated instructions that match the new Form 3115.
j. Greater and specific details are required about the taxpayer’s trades and businesses.
k. The 481(a) adjustment section has been expanded to include the new “eligible acquisition transaction election”.