Yes, Form 3115 does need to be used to report a change in accounting method to claim the depreciation that was not calculated in previous years.
The article that you cited above assumes that the depreciation was calculated every year.
- "The first thing you will need is the cost basis of the property, in our prior example $50,000. This should have been computed at the very beginning when you started taking depreciation. Generally, this amount is somewhat close to what you originally paid for the property.
- Next you need to compute the total depreciation that you took (or that you should have been taking). Say, in our case, we took a total of $10,000. If you had a professional prepare your taxes this is probably included as a schedule in your last year’s tax filing. A lot of the online tax software programs miss this information.
- Then you subtract the amount of depreciation taken (or that should have been taken) from the original cost basis. This is known as the “adjusted cost basis” of your property, in our example it would be $40,000.
- Next you need the amount you sold the property for minus any fees or commissions. This is known as your “net proceeds.” In our example, say we sold it for $60,000 and paid $5,000 in selling costs, so our net proceeds would be $55,000.
- Take the net proceeds figure and subtract from it the adjusted cost basis: $55,000-$40,000=$15,000. This is the amount of gain you have realized.
- Compare your realized gain with your depreciation expense: $15,000>$10,000. The lower of the two figures is the amount the IRS considers subject to depreciation recapture at your ordinary income tax rate. In this case, $10,000 is subject to depreciation recapture at your ordinary income rate. The remaining $5,000 is taxed at the capital gains rate."
From Kiplinger
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