What the Form 3115 CPA Support Package Includes
Our optional add-on gives your CPA or tax preparer a documented starting point for the accounting method change, built directly from your cost segregation study. It includes:
Form 3115 Needs Assessment
We review your placed-in-service date and filing history to flag whether a Form 3115 is likely needed. If a property has been placed in service and depreciated straight-line for one or more years, a Form 3115 is usually required. Your CPA confirms eligibility and the applicable tax treatment.
Draft Form 3115 for CPA Review
A draft Form 3115 built from your cost segregation study, ready for your CPA or tax preparer to review and finalize. See the full scope below.
Depreciation Method Correction Support
If prior returns used a depreciation method that doesn't reflect the study's asset classifications, our calculation quantifies the difference so your CPA can implement the correction and claim the missed deductions.
Audit Support
Audit support is included in all of our cost segregation studies at no additional cost. In the event of a revenue service inquiry, we provide written responses regarding our engineering methodology, asset classifications, and study conclusions.
Scope of Service
Section 481(a)
“Catch-Up” Adjustment
Form 3115 is the mechanism that allows you to “catch up” on missed depreciation from prior years in the current tax year when implementing a cost segregation study after already using straight-line depreciation. This is done through an automatic accounting method change, which does not require amending prior-year tax returns.
With the Form 3115 CPA Support Package, we perform the Section 481(a) adjustment calculation using your cost segregation results and placed-in-service timeline. We package it with a draft Form 3115 and supporting statements in a clear format your CPA can review, adjust where needed, and finalize for filing.
What's in the Package
Section 481(a) adjustment calculation: your cumulative catch-up depreciation, calculated as the difference between depreciation already taken and the depreciation supported by the cost segregation study.
Supporting statements: draft attachments that describe the accounting method change and compare it with prior depreciation, formatted for your CPA's review.
Draft Form 3115: prepared from the study and the information you provide, ready for your CPA to review and finalize.
Give your CPA a head start on Form 3115, so you can focus on growing your real estate portfolio.
Implement cost segregation results without amending prior tax returns.
Quantify missed depreciation from prior years.
Hand your CPA organized, study-based documentation.
Maximize the tax benefits from your cost segregation study.
We do the cost segregation heavy lifting behind Form 3115, so your CPA can finalize it efficiently.
Specialist calculations. Clear documentation. CPA-ready drafts.
Recover Missed Tax Deductions
One of the primary benefits of filing IRS Form 3115 is the ability to correct past errors in depreciation methods and recover missed deductions without having to amend previous tax returns. This can result in significant tax savings by allowing you to take advantage of deductions you may have overlooked.
Flexibility in Tax Strategy
By allowing you to change your method of accounting for depreciation, Form 3115 gives you greater control over your tax strategy. Whether you need to accelerate depreciation to offset gains or correct past mistakes, this form gives you the flexibility to optimize your tax approach in alignment with your financial goals.
Maximize Depreciation and Increase Cash Flow
Filing Form 3115 after a cost segregation study allows you to catch up on the missed depreciation from the time the property was placed in service to the current tax year. The result is an increase in current deductions, which in turn boosts cash flow by reducing the taxable income in the current tax year. Any unused depreciation expense will carry forward into the following years until all of the expense has been deducted against income.
Compliance with IRS Regulations
Form 3115 allows you to change your accounting method in compliance with IRS guidelines, which helps avoid penalties and ensures that your business follows the correct tax reporting standards. By filing this form, you correct any past inconsistencies and stay on the right side of the law.
Section 481(a) Adjustment Benefits
The Section 481(a) adjustment is what allows you to claim the missed accelerated depreciation you would have taken in prior years had cost segregation been implemented earlier, captured as a “catch-up” adjustment in the current year. This is a major reason Form 3115 can unlock meaningful tax savings without amending prior returns.
It also ensures there’s no double-counting of deductions or omissions when switching depreciation methods, preventing inconsistencies across tax years and supporting a smooth, compliant transition.
Request Your Free Proposal
Our team of experts will work with you to identify potential savings and make the process easy and hassle-free.
Frequently Asked Questions
Real estate investors need to file IRS Form 3115, Application for Change in Accounting Method, when they're changing how they depreciate their property, most commonly after completing a cost segregation study on a property they've owned for more than one tax year. If you've already filed tax returns using straight-line depreciation and now want to implement accelerated depreciation based on a cost segregation study, Form 3115 formally notifies the IRS of this accounting method change. The form allows you to claim all previously unclaimed depreciation through a Section 481(a) adjustment in the current year, effectively catching up on years of missed accelerated depreciation without the need to amend prior returns.
This is particularly valuable because amending returns can trigger additional scrutiny, has statute of limitations restrictions, and requires significantly more paperwork. Form 3115 also helps correct past depreciation errors, such as using the wrong recovery period or failing to claim depreciation altogether. The automatic consent procedures for many common changes mean you don't need IRS pre-approval, making the process relatively straightforward. Filing this form ensures full compliance with IRS regulations while maximizing your legitimate tax deductions, protecting you from potential penalties or disputes during an audit.
Absolutely. Form 3115 is the essential bridge that allows you to implement cost segregation benefits when you've already been depreciating your property using standard straight-line methods. After completing a cost segregation study that identifies components eligible for shorter depreciation periods, Form 3115 enables you to formally change your depreciation method from straight-line to the accelerated method identified in the study. This change allows you to reclassify various building components into 5-, 7-, and 15-year property categories rather than the standard 27.5 or 39 years.
The most powerful aspect of Form 3115 is the Section 481(a) adjustment, which captures all the additional depreciation you would have claimed in prior years had you used cost segregation from the beginning. This means if you've owned a property for five years and just completed a cost segregation study, you can claim five years' worth of missed accelerated depreciation in the current tax year. This front-loading of deductions can create significant tax savings and improved cash flow, making Form 3115 an invaluable tool for maximizing the benefits of your cost segregation study.
The form essentially allows you to correct your depreciation method going forward while catching up on past benefits, all without the complexity of amending previous returns.
While there's technically no limit to how far back you can perform a look-back study, practical considerations apply. You can capture depreciation from all open tax years, typically the most recent three years, and can even capture benefits from closed years through a Section 481(a) adjustment on Form 3115. However, documentation availability tends to decrease over time, making older studies more challenging.
The cost-benefit analysis becomes less favorable for older properties since depreciation already taken reduces the remaining benefit. The recommended approach is to focus on properties placed in service within the last 15 years, prioritizing higher-value properties first. You should evaluate the remaining depreciable life of the property and confirm that adequate documentation is available before proceeding with older properties.
No. If you didn't do a cost segregation study in year one, you may still be able to complete a "look-back" study and catch up on missed depreciation using IRS Form 3115 (accounting method change), depending on your situation.
Failing to file Form 3115 when required can have several negative consequences for your tax situation and long-term financial strategy. If you implement a cost segregation study without properly notifying the IRS through Form 3115, you risk having the accelerated depreciation deductions disallowed during an audit, potentially resulting in back taxes, interest, and penalties. The IRS views unauthorized accounting method changes as non-compliance, which can trigger increased scrutiny of your returns.
Without filing Form 3115, you also miss the opportunity to claim the Section 481(a) adjustment that captures all prior years' missed depreciation in one year, essentially leaving significant tax benefits on the table. Additionally, if the IRS discovers the inconsistency between your depreciation methods across years, they may require you to file the form anyway, but under examination procedures rather than automatic consent, which is more complex and potentially costly.
You might also face accuracy-related penalties if the IRS determines you should have known about the filing requirement. Perhaps most importantly, without proper documentation through Form 3115, you lack the clear paper trail demonstrating IRS compliance, which could complicate future property sales, refinancing, or additional tax planning strategies.
Here's a detailed overview: https://www.recostseg.com/post/look-back-studies-10-years
If the property has already been placed in service, we can complete a look-back study and provide a draft Form 3115, supporting statements and Section 481(a) calculation for your CPA to finalize.
No. The Form 3115 CPA Support Package is an optional add-on at $600 per property requiring the form under standard timelines. Not every client needs it, particularly those who acquire a property and implement cost segregation in the same tax year. A rush premium may apply close to tax deadlines.
The package includes a draft Form 3115, supporting statements and the Section 481(a) catch-up depreciation calculation, all for your CPA's review and finalization. When you request a proposal, we'll flag whether Form 3115 is likely needed based on your placed-in-service date and filing history.
Many CPAs find that starting from our study-based calculations and draft saves them time on the cost segregation side of the method change.
Request a free proposal or contact us for details on your properties.
R.E. Cost Seg provides a draft Form 3115, supporting statements and a Section 481(a) adjustment calculation using the cost segregation study and information supplied by the client. Your CPA or tax preparer must review these materials against your tax records, confirm the applicable tax treatment and eligibility, make any necessary revisions, and finalize the form for filing. Our standard service does not include signing or filing Form 3115. Before purchasing, please confirm that you understand and accept that our service provides a draft Form 3115 and supporting calculations for review and finalization by you or your tax professional. Signing and filing are not included in our standard service.