IRS releases Section 451(b) automatic method change guidance

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November 2018

Overview

The IRS has released Rev. Proc. 2018-60, which provides automatic consent for taxpayers to change their methods of accounting to comply with new Section 451(b), added under the 2017 tax reform act (the Act). Rev. Proc. 2018-60 applies to tax years beginning after December 31, 2017, and can be accessed here.

Rev. Proc. 2018-60 provides welcome relief for taxpayers seeking to comply with Section 451(b) by allowing taxpayers to use the automatic procedures to change their methods of accounting. It also provides flexibility for certain eligible taxpayers to make a method change to comply with Section 451(b) without filing a Form 3115 if they are willing to forgo audit protection.

The takeaway

Rev. Proc. 2018-60 provides welcome relief for taxpayers seeking to comply with Section 451(b), as amended by the Act, by allowing taxpayers to use the automatic procedures to change their methods of accounting. It also provides audit protection to taxpayers filing a Form 3115 and generally allows taxpayers to take Section 481(a) adjustments over the traditional periods.

At the same time, Rev. Proc. 2018-60 provides flexibility for certain eligible taxpayers to make a method change to comply with Section 451(b) without filing a Form 3115 if they are willing to forgo audit protection.

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Christine Turgeon

Partner, Federal Tax Services Leader, PwC US

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