IRS Will Not Rule on Change of Accounting Method From One Being Proposed in Audit

In emailed advice (201033038), the Chief Counsel’s office refused to allow an automatic change of accounting method request of a taxpayer to be processed under the following fact pattern.

The taxpayer and the IRS were in a current dispute regarding the taxpayer’s proper method of accounting for an item.  On exam the IRS contended that the taxpayer had not requested consent under the automatic change procedures to change its method of accounting for certain obligations.  The taxpayer began using that method in the year in question and had continued to use that method for four years.

The taxpayer is now requesting that the IRS grant permission to change its method to continue to use its current method.  The Chief Counsel’s office determined that the IRS could not grant this request.  Because the old method, at this time, is not the method the taxpayer is actually using this is not a change request.

The IRS position on exam is not final at the point the request is being made.  As such, the method does not yet qualify as a Service-imposed method. Thus, at this point, the request is improper since no change is being requested.  Revenue Procedure 97-27 only applies to a taxpayer requesting a change.

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