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90 Day Window This window allows the taxpayer(s) 90 days, startin
after the beginning of the examination, to file a for 3115 with the National
Office to change their method of accounting subject to the following
exceptions: -- Does not apply if the taxpayer is already under examination for any other taxable year on the date of contact by the Service. For example, an examiner is auditing a taxpayer's 1990 Form 1120 and determines that the taxpayer will now be required to maintain inventories of parts and paint. After 90 days the examiner notifies the taxpayer that the 1991 and 1992 Forms 1120 will be picked up for examination. The taxpayer will not be allowed to file the Form 3115 within 90 days after notification of the intent to audit the 1991 and 1992 tax year. If the taxpayer is allowed to make the change in
accounting method himself or herself, the treatment of the IRC section 481(a)
adjustment depends upon whether it is a net positive or net negative
adjustment. If the change from a Category A method results in a
net positive adjustment, the taxpayer must take the net Section 481(a)
adjustment into account ratably over 3 taxable years beginning with the
earliest year under examination. If the adjustment is a net negative adjustment
the taxpayer would need to take it into taxable income entirely in the year the
Form 3115 would be considered timely filed under subsection 5.01 of the Revenue
Procedure. 120 Day Window This window applies to the 120 days following the
date an examination ends even though a subsequent examination may have commenced. However, the window will not be available under the following
situations: 1. The method of accounting is included as an
item of adjustment in a basic report form as a result of a prior examination by
the Service or, 2. The method of accounting issue is placed in
suspense by the Service or, 3. The taxpayer has received written notification
from the examiner (by examination plan, information document request,
notification of proposed adjustments, or income tax examination changes) prior
to the filing of the Form 3115 specifically 8-13 Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Glossary |