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New rules for changing methods.

The Internal Revenue Service issued new procedures for taxpayers requesting a change in accounting method. Margaret Milner Richardson, then IRS commissioner, said the new procedures would help increase voluntary compliance by making tax laws easier to follow. "These new rules greatly simplify the process," said Richardson.

Taxpayers generally request a change in accounting method for items reported as income or taken as a deduction. For example, individuals who own rental property and have used an incorrect method to depreciate it or sole proprietors who use an accrual basis to account for inventory need to file Form 3115, Application for Change in Accounting Method.

The new rules--revenue procedure 97-27--reduce or eliminate many of the complexities involved with filing form 3115. For example, there no longer are different classification categories, and a single adjustment period for both positive and negative adjustments replaces the various adjustment period requirements in the old rules. Perhaps the most notable change is that taxpayers may now file form 3115 any time during the year. "Before this, taxpayers had to file their requests within the first 180 days of the year," said Loretta Peto of Peachin & Peto in Tucson, Arizona. "The new procedures really help taxpayers who do not discover until late in the year they must file a change."

The changes became effective on May 15. Revenue procedure 97-27 is available from the IRS by calling 202-622-4040.
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Article Details
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Publication:Journal of Accountancy
Article Type:Brief Article
Date:Aug 1, 1997
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