IRS Grants Extension for Late Form 3115 Filing Due to CPA Error

IRS Grants 45-Day Extension for Late Form 3115 Filing After CPA Oversight

The IRS granted a 45-day extension to a partnership to file its Form 3115 after its CPA inadvertently failed to upload the required application to the taxpayer’s timely filed federal income tax return. The ruling, issued in a February 12, 2026 private letter ruling (PLR-115148-25), permits the taxpayer to avoid disallowance of a § 263A accounting method change for capitalizing costs to self-constructed assets—potentially preserving significant deductions. The IRS emphasized the non-precedential nature of the decision, which relied solely on the taxpayer’s representations and was not subject to independent verification.

The Question: Can a Taxpayer Fix a Late Form 3115 Filing Due to Advisor Error?

The taxpayer sought to change its accounting method for capitalizing costs under § 263A, which requires producers of inventory or self-constructed assets to capitalize certain direct and indirect costs into the asset’s basis rather than deducting them immediately. To implement this change, the taxpayer intended to use the automatic consent procedures outlined in Revenue Procedure 2015-13 and Revenue Procedure 2023-24, which allow taxpayers to alter their accounting methods without securing prior IRS approval—provided the change is filed correctly with the timely filed federal income tax return.

To execute the change, the taxpayer engaged a CPA to prepare and file its federal income tax return for the tax year in question, as well as to prepare and file Form 3115, Application for Change in Accounting Method. The CPA completed the Form 3115 and mailed a duplicate copy to the IRS processing center in Ogden, Utah, on Date A, as required by the automatic consent procedures. The CPA then electronically filed the taxpayer’s federal income tax return on Date B, which was timely filed under the automatic consent regime. The return was prepared and filed on the basis that the accounting method change had been properly implemented.

However, subsequent to the electronic filing on Date B, the taxpayer discovered that the CPA had failed—through inadvertence—to upload the original Form 3115 to the electronically filed federal income tax return. This omission violated the filing requirement under section 6.03(1)(a)(i)(A) of Rev. Proc. 2015-13, which mandates that the original Form 3115 must be attached to the electronically filed return for the automatic consent procedures to apply. The taxpayer, acting through the CPA, subsequently sought an extension of time to file the original Form 3115 under §§ 301.9100-1 and 301.9100-3, which allow relief for late regulatory elections when the failure was not willful and the taxpayer acted reasonably and in good faith.

The IRS's Rationale: Reasonable Action, Good Faith, and No Government Prejudice

The IRS applied the standards under § 301.9100-1(c), which grants the Commissioner discretion to extend deadlines for regulatory elections when the taxpayer’s failure was not willful, the taxpayer acted reasonably and in good faith, and granting relief would not prejudice the government. Under § 301.9100-3(a), the IRS specifically requires that the taxpayer demonstrate reasonable cause, good faith, and no adverse impact on tax administration.

The IRS concluded the taxpayer met these standards based on the taxpayer’s prompt action after discovering the error. The IRS emphasized that the taxpayer’s reliance on the CPA’s oversight did not constitute willful neglect, as the error was discovered and addressed without delay. The timely mailing of the duplicate Form 3115 and the consistent filing of the return further supported the conclusion that the taxpayer acted reasonably and in good faith. Critically, the IRS found no prejudice to the government, as the late filing did not affect the IRS’s ability to assess or collect tax.

Accordingly, the IRS granted a 45-day extension from the date of the ruling letter to file the original Form 3115, allowing the taxpayer to cure the late filing under the automatic consent procedures of Rev. Proc. 2015-13.

Implications: What This Ruling Means for Taxpayers and Advisors

This ruling underscores the IRS’s willingness to grant relief for late filings when taxpayers demonstrate reasonable cause and lack of prejudice to the government. For taxpayers, it signals that § 9100 relief—specifically under §§ 301.9100-1 and 301.9100-3—remains a viable option for correcting procedural errors, such as missing deadlines for Form 3115, provided they can substantiate good faith and no adverse impact on tax administration. The IRS’s decision hinged on the taxpayer’s reasonable reliance on a CPA and the timely filing of the tax return, which mitigated any potential prejudice to the government.

For advisors, the case serves as a cautionary tale about the critical importance of double-checking Form 3115 filings, particularly in electronic filing environments where oversight can occur. Failure to file Form 3115—which is required for accounting method changes under Rev. Proc. 2015-13—can result in the disallowance of the method change, forcing taxpayers to revert to an improper accounting method and potentially triggering accuracy-related penalties under § 6662. The ruling also highlights the availability of § 9100 relief for similar errors, offering a lifeline for taxpayers who miss deadlines due to advisor mistakes or system failures.

However, taxpayers and advisors should note that private letter rulings (PLRs) are non-precedential, meaning this decision does not bind the IRS in future cases. Each situation remains fact-specific, and the IRS retains discretion to deny relief if it perceives undue delay or lack of reasonable cause. To ensure compliance with Rev. Proc. 2015-13, best practices include implementing internal review protocols for Form 3115 filings, maintaining detailed documentation of cost allocations under § 263A, and consulting tax advisors early when method changes are contemplated. Industries most affected—such as manufacturing, construction, and software development—should prioritize these safeguards to avoid costly adjustments or penalties.