Change of tax year - Spidell

Change of tax year

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Message Board Change of tax year

This topic contains 8 replies, has 2 voices, and was last updated by Anonymous 6 months, 1 week ago.

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  • #133346

    If you have a business that wants to change the tax year from a fiscal year to the calendar year, we still have to file Form 1128 right? Do you still have to meet the 80% gross receipts test?

  • #133447
    Mike Giangrande

    Yes, you still must file Form 1128. The 80% gross receipts test does not have to be met for business whose “required taxable year” is a calendar year, such as an S corporation or an LLC. Those entities can change to a calendar year without meeting the 80% test.

  • #133504

    What if you are changing from a Fiscal Year C corp to an S Corp (Form 2553 already submitted). Do you still need to meet the 1128?

  • #133518

    and meet the 80% test?

  • #133755

    Sorry, can someone get back to me on this?

  • #133865
    Mike Giangrande

    Thank you for providing more detail on this, it is very helpful.

    If you have a fiscal year C corporation that makes an S election then, by default, your corporation must file on a calendar year basis. Remember, S corporations have a required tax year end of December 31. If you want to keep the fiscal year, you must either file Form 1128 or, when you filed Form 2553, Part II provides an election to maintain your fiscal year.

    So, when you made the S election for your fiscal year C corporation, you are automatically converted to the calendar year as of the effective date of your S election.

    If an S corporation, even one that used to be a fiscal year C corporation, wants to maintain its fiscal year, it must request IRS permission to do so. Now, you have mentioned the 80% test a couple times now. The 80% test is one way to prove to the IRS that you have a natural business year, but it is not the only method.

    We did a webinar on the check-the-box regulations that contains all these rules and more for selecting fiscal years. If you are interested, please contact our customer service staff.

  • #133880

    Oh got it, thank you. I didnt know that it was automatic when you have a Fiscal C to an S

  • #135069

    Also, I am guessing you have to paper file the short – year C Corp return as well as the new S corp return as it may not reflect in the IRS system? Last year, I had someone change from a Fiscal C to a calendar S and it wouldnt let me efile the return…hence i thought i had to file form 1128 and meet the 80% rule. I thought there was an election for the 1128 form that gives you an automatic calendar year end change if it conforms to the taxpayers natural business year?

  • #135881

    following up on this, thanks