Our C-corp client needed to file on the accrual basis for the past 4 years due to average gross receipts > $5 million. However, they filed on the cash basis. This year they were going to file Form 3115 and do a section 481a adjustment to pick up the additional income over 3 years for the cash to accrual adjustment for the previous years that were filed incorrectly. However, they did not file an extension and have not yet filed their tax return, thus they have missed their opportunity to file 3115 this year.
Because the initial year that they should have been filing on the accrual basis is beyond the 3-years allowed for amended returns, we are afraid to file an amendment for fear it would open up the entire tax return to scrutiny. Thus we are considering just reporting the adjustment for the cash-accrual this current year and paying any penalties and interest.
I am wondering if anyone has experience in this area and could suggest a course of action that would be appropriate here. Thanks.
Because the initial year that they should have been filing on the accrual basis is beyond the 3-years allowed for amended returns, we are afraid to file an amendment for fear it would open up the entire tax return to scrutiny. Thus we are considering just reporting the adjustment for the cash-accrual this current year and paying any penalties and interest.
I am wondering if anyone has experience in this area and could suggest a course of action that would be appropriate here. Thanks.