How to Use Form 3115 DCN Codes for Automatic Changes

Taxpayers use Form 3115, Application for Change in Accounting Method, to request permission from the Internal Revenue Service (IRS) to alter how they record financial activities for tax purposes. The IRS simplifies this process for many common changes by designating them as “automatic,” which removes the need for advance consent. This streamlined procedure uses Designated Change Numbers (DCNs), which are codes that signal the filer is adopting a pre-approved accounting method modification.

Understanding Designated Change Numbers

A Designated Change Number is a specific code the IRS assigns to an accounting method change that it has pre-approved for automatic consent. When a taxpayer includes a DCN on Form 3115, it communicates to the IRS that the change is eligible for the automatic change procedure. This eliminates the need to pay a user fee, which is required for non-automatic changes, and bypasses the waiting period for explicit IRS approval.

The automatic nature of the change means the taxpayer can implement the new accounting method in the year of change without waiting for a consent letter from the IRS. This allows both the agency and taxpayers to manage common accounting adjustments with greater ease and certainty.

Identifying the Applicable DCN Code

The process of finding the correct DCN requires a careful review of the official IRS “List of Automatic Changes,” which is found as an appendix to the main Revenue Procedure governing these changes, such as Revenue Procedure 2025-23. This document contains detailed descriptions of each qualifying automatic change. The taxpayer must match the specific facts of their situation to one of these descriptions to identify the appropriate code for their Form 3115.

For example, one of the most frequently used codes is DCN 7, which applies to a change from an impermissible method of depreciation to a permissible one. This could occur if a business incorrectly calculated depreciation in prior years and needs to correct it. If that same type of change is needed for property that has already been sold or disposed of, the filer would instead use DCN 107. Another common scenario involves the treatment of costs related to repairs and maintenance, where DCN 184 might apply.

The list is extensive and covers many areas, including how inventory is valued and how certain costs are capitalized versus expensed. Changes related to research and experimental expenditures, for instance, are addressed under DCN 265, reflecting updates for how these costs must be amortized over time. It is important to read the full description for the potential DCN, as it often contains specific requirements and limitations that must be met to qualify for the automatic change.

If a taxpayer’s desired accounting method change does not appear on the list, it means the change is not eligible for the automatic procedure. In that case, the taxpayer must file for a non-automatic change. This is a different process that requires paying a user fee and obtaining advance written consent from the IRS National Office before the change can be implemented.

Completing Form 3115 with the DCN

Once the correct Designated Change Number is identified, it must be entered on the first page of Form 3115, in Part I, Line 1a. This entry is the primary indicator to the IRS that the filer is requesting an automatic method change, which directs how the form is processed.

Along with the DCN, the filer must also provide a citation to the specific section of the governing Revenue Procedure that authorizes the automatic change. This reference provides the legal basis for the requested change and confirms that the filer has consulted the appropriate guidance.

Part I of the form also requires a brief description of the change being made. This narrative section allows the filer to explain in plain language the present method of accounting and the proposed new method. This information gives the IRS a complete picture of the adjustment being made.

Other parts of Form 3115 must be completed as well, including the calculation of any adjustment required under Internal Revenue Code Section 481. This adjustment prevents the duplication or omission of income or deductions as a result of the accounting method change. The instructions for Form 3115 provide a table that specifies which parts and schedules of the form must be completed for each specific DCN.

Filing Procedures for Automatic Changes

The submission process for an automatic change request using Form 3115 involves a dual-filing requirement. The taxpayer must file two separate copies of the form in two different locations. The original Form 3115 must be attached to the taxpayer’s timely filed federal income tax return for the year the change takes effect. This includes filing by the extended due date if the taxpayer has a valid extension.

A second, signed copy of the same Form 3115 must be sent directly to the IRS office in Ogden, Utah. The mailing address for this copy is specified in the instructions for Form 3115. This duplicate copy must be mailed no earlier than the first day of the year of change and no later than the date the original form is filed with the tax return.

After properly filing under the automatic change procedures, the taxpayer will not receive an acknowledgment of receipt or a consent letter from the IRS. Consent is implicitly granted as long as the Form 3115 is filed correctly and in accordance with the governing Revenue Procedure. The taxpayer can then proceed with implementing the new accounting method for the year of change.