A form 3115 should be used. An accounting method, once
chosen - even if chosen in error, cannot be corrected
without the filing of a Form 3115.

For your client, however, the procedures are fairly
abbreviated - there is an automatic consent procedure that
your client should fall under as a small business.

You should complete the items required on the 3115 for a
small business to change from accrual to cash method, and
then you will attach the original to the timely filed return
for this year and send a copy to the national office
(addresses are listed in the instructions).

You should also make it clear that they filed the first return on the cash
method so that it's clear that there should not be any need for
adjustments.

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<swtstg[at]yahoo.com> wrote:

- quote -

Form 3115 is not necessary if there's no real change in
method, nor is an amended return necessary. Since the
statute (section 446) doesn't reference any election to be
made on the return, the actual method used from the first
year controls for the future. IOW, checking the wrong box
is a harmless error, and it further has no effect on whether
the second year's return might be selected for examination
(IRS doesn't compare one paper copy to another in the
screening process).

Fred F.

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I have a client who filed there fist return last year,
checking the accrual method of accounting but using cash
basis information on the return. They are a small company
with no inventory and qualify for using the cash basis. Is a
3115 neccessary to correct this or should an ammended return
be used?

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