Change in Accounting Method Form (IRS Form 3115)
A Change in Accounting Method Form, officially known as IRS Form 3115, is the form businesses must file with the IRS when they want to change how they report income, expenses, inventory, or other items for tax purposes. It's also commonly referred to as a Change of Accounting Method Form.
For ecommerce businesses, this often includes changes like switching from accrual to cash basis, adopting the Section 471(c) simplified inventory method, or stopping the capitalization of costs under Section 263A.
When Do You Need to File a Change in Accounting Method Form?
You need to file Form 3115 when you want to change your tax accounting method—this can affect how and when you recognize income and expenses, calculate inventory costs, or apply depreciation.
There are two categories:
1. Automatic Accounting Method Changes
These are the most common and do not require advance IRS consent. You simply file Form 3115 with your timely filed tax return. Ecommerce brands under the $31 million gross receipts threshold (2025) may qualify.
Examples include:
- Switching from accrual to cash method
- Using 471(c) to simplify inventory accounting
- No longer applying Section 263A
- Changing depreciation methods
2. Non-Automatic Changes
These require prior IRS approval and are less common.
What's Included in the Form?
The Change in Accounting Method Form (Form 3115) includes:
- A description of your current method
- A description of your new method
- The reason for the change
- Whether the change is automatic or non-automatic
- Any required Section 481(a) adjustment (to reconcile past differences)