Topic Thread

Non-automatic change in accounting method

  • 1.  Non-automatic change in accounting method

    Posted 02-12-2019 15:27
    I was wondering if anyone has filed a Non-Automatic change in accounting method for exempt long-term contracts. We have a client who is on the accrual method and using CCM for their long-term contracts. They are under the $25mil small contractor exemption. But they want to switch to PCM. My understanding that the switch would be a non-automatic change and subject to the $9,500 fee and they would need to apply during the year they want to switch since they need the IRS's consent. Does anyone know how long it is taking the IRS to respond?

    Christine Ulibarri CCIFP, CPA
    BeachFleischman PC
    Phoenix AZ
    (602) 792-5941

  • 2.  RE: Non-automatic change in accounting method

    Posted 02-13-2019 08:15
      |   view attached
    The tax cuts and jobs act made numerous changes to this area as I'm sure you are aware based on the question.  One of the changes was that they issued an automatic change number to change your accounting for long-term contracts under section 460.  You can find this information in Rev Proc 2018-40.  So to answer your question, I do not think you need to apply for a non-automatic change or pay the fee if you qualify as a small contractor under the new rules.  Therefore, you can file with the return for the year you are making the change and not have to wait for their consent to come through.

    Dennis J. Shindle, Jr. CPA, CCIFP
    Rotz & Stonesifer, P.C.
    Chambersburg PA
    (717) 264-5961


    rp-18-40.pdf   74K 1 version

  • 3.  RE: Non-automatic change in accounting method

    Posted 02-14-2019 07:25
    ​Revenue Procedure 2018-40 and the related change number 236 will not work for you since you are currently using the completed contract method of accounting for your long term construction contracts.  You would have to file a non automatic method change in order to go off that method and choose another method for your long term construction contracts.  You could look at changing your overall method of accounting from accrual to cash.  I don't believe completed contract has to be used in conjunction with the accrual method of accounting.  So you would still employ the completed contract method but it would be paired with the cash method of accounting.  Expect a long wait for non automatic changes in accounting methods....I filed one at the end of 2017 and did not get consent until September of 2018 and that was prior to a government shutdown with the IRS.  As far as I know, the fee remained at $9,500 but you should confirm that with Rev Proc 2019-01.

    Andrew Rose CPA, CCIFP
    Tax Principal, Construction Industry Group Leader
    Lansing MI
    (517) 316-2400