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Overview
On May 13, 2025, the IRS released Revenue Procedure 2025-23, updating the framework under which taxpayers can request automatic consent for changing their method of accounting. This new guidance modifies and expands upon the prior procedures in Rev. Proc. 2015-13 and the list of automatic changes under Rev. Proc. 2024-23.
The updates are especially important for tax professionals, CFOs, and controllers looking to manage compliance with evolving IRS standards on accruals, cost recovery, depreciation, and more.
Why the Rev Proc is important?
Accounting method changes usually require advance IRS consent. However, Rev. Proc. 2025-23 streamlines this process by allowing many changes to be made under the automatic consent procedures—a major compliance and administrative benefit.
How to file a change in accounting method?
To implement a change in accounting method taxpayers file Form 3115 with a timely filed tax return (including extensions). A duplicate Form 3115 must also be submitted to Ogden, UT. Note, you should make sure that (i) you reference the proper Designated Change Number (DCN) and (ii) ensure the change hasn’t been made in the previous five years.
Updated Categories of Automatic Accounting Method Changes (Appendix A Summary)
Below is a selection from the IRS’s updated Appendix A, highlighting areas now eligible for automatic consent:
Section 1: Gross Income (§61)
- Up-front payments for network upgrades received by utilities
Section 2: Commodity Credit Loans (§77)
- Treating certain loan proceeds as actual loans instead of income
Section 3: Trade or Business Expenses (§162)
- Smallwares packages for restaurants
- Repair and maintenance cost treatments
- Wireline and wireless network asset accounting methods
Section 4: Bad Debts (§166)
- Changes from the reserve method to the specific charge-off method
Section 5: Interest Expense (§163)
- Compliance with §163(e)(3) for original issue discount
- Revocation of amortizable bond premium elections (§171)
Section 6: Depreciation and Amortization (§167, §168, §197)
- Changes in grouping of general asset accounts (DCN 200)
- Changes in identification methods for disposed assets (DCN 207)
- Disposition methods for leasehold improvements (DCN 199)
Section 7–12: Other Notable Areas
- SRE (Specified Research or Experimental) expenditures
- UNICAP methods under §263A
- Cable and natural gas utility capitalization methods
- Safe harbor methods for linear and non-linear property depreciation
Final Thoughts
Rev. Proc. 2025-23 is a powerful tool for aligning tax reporting with business practices. Whether you’re optimizing depreciation schedules or updating revenue recognition, this update offers much-needed administrative relief—provided you’re proactive and compliant. Shoot us an email if you have any questions regarding filing a Form 3115.
Disclaimer: The information provided herein is intended solely for informational purposes and no person(s) or other third-party may rely upon it as financial, tax, or legal advice or use it for any other purposes. As a result, Royal Financial, and any affiliates, assume no responsibility whatsoever to readers, or any other persons for that matter, as a result of the information contained herein.