March 26, 1992
TO: TAX COMMITTEE NO. 11-92
ACCOUNTING/TREASURERS COMMITTEE NO. 14-92
RE: IRS REVISES REVENUE PROCEDURE RELATING TO CHANGES IN METHODS
OF ACCOUNTING
__________________________________________________________
The attached IRS Revenue Procedure (No. 92-20) sets forth
the general rules for obtaining the IRS' consent to change a
method of accounting. Revenue Procedure 92-20 modifies and
supersedes Rev. Proc. 84-74 by providing incentives for taxpayers
to promptly comply with proper tax accounting principles. Rev.
Proc. 92-20 has no effect, however, on Rev. Proc. 92-13, which
provides rules for seeking expedited approval for changing a
method of accounting. (See Institute Memorandum to Tax Members
No. 6-92 and Accounting/Treasurers Members No. 3-92, dated
January 17, 1992.)
Under Rev. Proc. 92-20, if a taxpayer requests a change in
accounting method before the IRS contacts the taxpayer for
examination, the procedures previously set forth in Rev. Proc.
84-74 remain generally applicable. If a taxpayer files a request
to change an accounting method within 90 days after being
contacted by the IRS for examination, the forms and conditions
for approval of the change (e.g., year of change and Code section
481(a) adjustment period) will be less favorable than had the
request for change been made before the IRS contact, but more
favorable than the terms and conditions available thereafter.
In addition, the Revenue Procedure provides that taxpayers
will generally not be permitted to delay making a newly imposed
statutory change in method of accounting unless they agree to pay
for the time value of delaying the change.
This revenue procedure will generally apply to Forms 3115,
Application for Change in Accounting Method, filed after March
23, 1992. Certain special effective date rules apply to
taxpayers currently under IRS audit.
We will keep you informed of developments.
Keith D. Lawson
Associate Counsel - Tax
Attachment