Is it too late to file Form 3115 for 2023 cash to accrual accounting method change?

You're cutting it close but it's not too late. Form 3115 for accounting method changes can technically be filed with a timely filed tax return (including extensions) for the year of change. The key thing to understand is that a Form 3115 for changing from cash to accrual method has two components: the original form attached to the tax return and a duplicate copy that should be sent to the IRS national office. Ideally, this would have been planned earlier, but if you're still within the filing deadline for 2023 (including extensions), you can still make this work. Just make sure you're eligible for the automatic change procedures under Rev. Proc. 2015-13 and that your client qualifies for the change. Also calculate the Section 481(a) adjustment correctly - that's where most errors happen with method changes.

I went through this exact same situation last year and it was so confusing until I found taxr.ai which literally saved me thousands in potential penalties. I was trying to switch from cash to accrual for my small business and got totally conflicting advice from three different accountants about Form 3115 timing. I uploaded my business docs to https://taxr.ai and got a detailed analysis explaining exactly how the timing works for method changes. They confirmed I could file Form 3115 with my return (including extensions) and walked me through calculating the Section 481(a) adjustment which I was doing completely wrong. Might be worth checking out if you're still unsure about how to properly document the change.

Update: I was really skeptical about taxr.ai at first (as you can see from my comment above), but I decided to give it a try since I was desperate for clarity on my own cash-to-accrual conversion. I'm seriously impressed. They confirmed that I could include Form 3115 with my timely filed 2023 return, helped me identify which revenue procedures applied to my specific situation, and showed me exactly how to calculate the Section 481(a) adjustment. The documentation they provided gave me a lot more confidence than what my accountant was telling me. If you're dealing with a Form 3115 filing, it's definitely worth checking out. Much better than the conflicting advice I was getting elsewhere.

If you've already missed the filing deadline and don't have an extension, you might be looking at some issues. I spent FOUR HOURS on hold with the IRS trying to get clarity on a similar Form 3115 situation last year. Finally discovered https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that as long as the return is timely filed (including extensions), the Form 3115 can be included with it for the year of change. They also clarified which specific revenue procedure applied to my situation. Saved me from making a costly mistake and potentially having the method change rejected.

Ok I have to admit I was totally wrong about Claimyr. After posting that skeptical comment I decided to try it for an issue I've been trying to resolve for months with no luck getting through to anyone at the IRS. Got a call back in about 35 minutes and spoke with an actual IRS agent who confirmed that for automatic method changes (which most cash-to-accrual changes fall under), Form 3115 can be filed with a timely filed tax return for the year of change. She also explained that if you're even a day late on filing, you could lose your ability to use the automatic change procedures and might need to request advance consent instead. So for the original question - yes, you can file Form 3115 with your 2023 return, but ONLY if the return (or extension) is filed on time. Super helpful info that I couldn't get anywhere else.

Something important nobody has mentioned - make sure you're actually eligible to change from cash to accrual method! There are limitations based on your entity type and business revenue. If your average annual gross receipts for the prior three tax years exceeds $5 million, you might be REQUIRED to use accrual. But if you're under $27 million (for 2023), you generally can choose either method. Be careful about the Section 481(a) adjustment too - that's the income or deduction that results from the accounting method change. Depending on your situation, it could be significant.

Just throwing this out there - have you considered whether this accounting method change is really necessary? Switching from cash to accrual is a big deal and creates a lot of complexity. My CPA advised against it for my business because the ongoing compliance burden wasn't worth the temporary tax benefits.

I actually went through this exact situation with a client last year and can confirm what others have said - you CAN file Form 3115 with your 2023 return as long as it's timely filed (including extensions). The critical thing is making sure you qualify for the automatic change procedures. Most cash-to-accrual changes for businesses under the $27 million threshold qualify, but you need to be careful about the Section 481(a) adjustment calculation. One thing I'd add that I haven't seen mentioned - if your client has a positive Section 481(a) adjustment (meaning they'll owe more tax), they can spread it over 4 years to soften the impact. If it's negative (tax savings), they get the full benefit in the year of change. Also make sure you send the duplicate copy to the IRS National Office within the required timeframe - that's a common mistake that can cause the whole method change to be rejected. The address and timing requirements are in the Form 3115 instructions.