How To Change Accounting Methods Using IRS Form 3115

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The Internal Revenue Service (IRS) allows businesses to use either the accrual accounting method or the cash accounting method to track and report financial data. Business owners also have the option of using a combination of both accounting systems. There's a lot of flexibility here, but there's one catch: you must continue to use whatever method you choose when you first inform the IRS that you've elected to track and report that way during the first year of your business operation.

It isn't quite as carved in stone as it sounds, however. You can reach out to the IRS in advance and request permission to change accounting methods. But, if you fail to make the request, you could end up suffering tax penalties imposed by the IRS.

Key Takeaways

  • Businesses can choose to use the accrual accounting method or the cash accounting method, and they must inform the IRS of their choice.
  • If you want to change the accounting method your business uses, you need to request it from the IRS by filing form 3115.
  • Failing to request the change could result in penalties.

Requesting IRS Approval To Change Accounting Methods

If you want or need to change your accounting method for your business any time after you've set up your accounting method and filed your first business income tax return, you must file a current Form 3115 to request the change.

Form 3115 is used when you want to change your overall accounting method and also if you need to change the accounting treatment of any particular item.

Changes in accounting methods that require approval from the IRS include switching from a cash basis method to an accrual basis method or vice versa. You must also request an official OK from the IRS to make a change in the method or basis used to value your inventory.

Changes in your depreciation or amortization methods generally require approval, but some changes in the straight-line method are permitted without special permission from the IRS. If you're unsure if your situation qualifies for this special dispensation, consult a business tax professional to make sure because the rules are complex.

How To File Form 3115

There are two types of change requests: automatic and non-automatic. Businesses typically follow the automatic change request process, but it will depend on several factors for your business.

File Form 3115 in duplicate (two copies) for an automatic change request. Attach the original Form 3115 to your federal income tax return for the year of the change, including extensions. A copy of Form 3115 must also be filed with the IRS National Office no earlier than the first day of the year of the change and no later than when the original is filed with the federal income tax return for the year of change.


The IRS does not send a receipt for automatic change requests, but it will send an acknowledgment of receipt within 60 days for non-automatic change requests.

The process for a non-automatic change request is similar, but you'll need to meet certain eligibility requirements, and you'll need to pay a fee. Automatic change requests do not require a fee.

There's no specific deadline to file the form—the sooner the better. For automatic changes, you'll attach one copy to your tax return and send a copy to the address below:

  • Non-automatic change request: Internal Revenue Service, Attn: CC:PA:LPD:DRU, P.O. Box 7604, Benjamin Franklin Station, Washington, DC 20044
  • Automatic change request: Internal Revenue Service, Ogden, UT 84201, M/S 6111

If you're sending Form 3115 by private delivery service, mail it to one of these addresses:

  • Non-automatic change request: Internal Revenue Service, Attn: CC:PA:LPD:DRU, Room 5336, 1111 Constitution Ave. NW, Washington, DC 20224
  • Automatic change request: Internal Revenue Service, 1973 N. Rulon White Blvd., Ogden, UT 84201, Attn: M/S 6111


Not filing Form 3115 could mean that your business doesn't pay sufficient taxes, triggering an even bigger tax bill down the line.

Frequently Asked Questions (FAQs)

What is Form 3115?

Form 3115 is the document that businesses should use when they want to request a change in the overall accounting method or the accounting treatment of any item. A business chooses its accounting method when it files its first tax return and is required to use that same method year after year unless it wants to change methods. If that's the case, then it needs to file Form 3115.

How do you change your accounting method from cash to accrual?

To change your accounting method from cash to accrual, you need to file Form 3115 with the IRS. Certain business types may not be able to use the cash method and may need to use the accrual method. IRS Publication 538 can help you figure out which method is best for your business.

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  1. IRS. "Instructions for Form 3115."

  2. IRS. "About Form 3115, Application for Change in Accounting Method."

  3. IRS. "Publication 538: Accounting Periods and Methods."

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