A 481(a) adjustment is required in order to prevent duplication or omission of income or deductions when the taxpayer has changed their method of accounting, according to the IRS.
Any taxpayer filing changes in their accounting methods needs to file an IRC section 481 a adjustment and will need to submit Form 3115. This includes:
- Corporations
- S Corps
- Individuals
- Trusts
- Partnerships
How To Report 481(a) Adjustment on Tax Return
To report a 481(a) adjustment on a tax return, IRS Form 3115 is required. This form is also known as the Application for Change in Accounting Method and is required for any taxpayer that either changes their accounting method or revokes or makes certain late elections.
Depending on whether you are filing for an automatic change request or a non-automatic change request will determine the exact information you need to provide.
Completing this form and filing your 481(a) adjustment can be very complicated. It requires a significant amount of detailed information and detailed calculation based on relevant account balances.
The Form 3115 will ask for the following:
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