Podcast
Questions and Answers
In order to adopt a fiscal tax year on its first federal income tax return, the taxpayer must
In order to adopt a fiscal tax year on its first federal income tax return, the taxpayer must
Which of the following would NOT be an acceptable tax year?
Which of the following would NOT be an acceptable tax year?
Which form is used to change from one required tax year to another?
Which form is used to change from one required tax year to another?
An S corporation engaged in manufacturing has a year end of June 30. Revenue consistently has been more than $30 million under both cash and accrual basis of accounting. The stockholders would like to change the tax status of the corporation to a C corporation using the cash basis with the same year end. Which of the following statements is correct if it changes to a C corporation?
An S corporation engaged in manufacturing has a year end of June 30. Revenue consistently has been more than $30 million under both cash and accrual basis of accounting. The stockholders would like to change the tax status of the corporation to a C corporation using the cash basis with the same year end. Which of the following statements is correct if it changes to a C corporation?
Signup and view all the answers
Which of the following must adopt the calendar year as their tax year?
Which of the following must adopt the calendar year as their tax year?
Signup and view all the answers
Which of the following dates would NOT be considered the end of a tax year?
Which of the following dates would NOT be considered the end of a tax year?
Signup and view all the answers
All of the following tax years are acceptable tax years EXCEPT
All of the following tax years are acceptable tax years EXCEPT
Signup and view all the answers
One of the elections a new corporation must make is its choice of an accounting period. Which of the following entities has the most flexibility in choosing an accounting period?
One of the elections a new corporation must make is its choice of an accounting period. Which of the following entities has the most flexibility in choosing an accounting period?
Signup and view all the answers
In order to adopt a fiscal tax year, a taxpayer must get IRS approval.
In order to adopt a fiscal tax year, a taxpayer must get IRS approval.
Signup and view all the answers
A taxpayer can adopt a fiscal year if they don't keep any books or records.
A taxpayer can adopt a fiscal year if they don't keep any books or records.
Signup and view all the answers
Study Notes
IRS Approval and Fiscal Year Adoption
- Taxpayers must get IRS approval to adopt a fiscal tax year for their first federal income tax return.
- A completed Form 1128 must be attached to the fiscal year-basis income tax return.
- Taxpayers should file a short-period return if needed.
- Maintain accurate books and records for the entire tax year, and report all income and expenses accordingly.
Short Period Return Calculation
- Mr. Heston's adjusted gross income for the first 6 months of 2023 was $34,500.
- Itemized deductions were $15,800.
- His annualized income was calculated by annualizing his modified gross income, which is adjusted gross income minus deductions.
- Annualized short period income was calculated to be $37,400.
Acceptable Tax Year
- A tax year consisting of 12 consecutive months ending on the last day of the month is acceptable.
- Short tax years that occur due to business changes to the accounting period are acceptable.
- 52- or 53-week tax years are acceptable. An accounting period that changes to accrual method does not warrant a short year.
Changing Required Tax Year
- Form 1128 is for requesting a change in tax years.
- Permission is granted if there is a substantial business purpose behind the change.
- Partnerships, S-corporations, and PSCs can change their tax year and use Form 8716.
Changing Tax Year Status from S Corp to C Corp
- An S corporation's year-end must match that of the corporation's revenue streams and accounting methods.
- If the corporation stays on a June 30 year-end, and switches from S-corp to C-corp, the correct approach is to maintain a June 30 year-end and using accrual method.
Taxable Income for Short Tax Year
- Mr. Jones' adjusted gross income was $40,000, and itemized deductions were $16,000 for the 6-month period from January 1 through June 30, 2023.
- His taxable income for the short tax year was determined by subtracting itemized deductions from his adjusted gross income for the short tax period, then annualized by multiplying the number by 12 months, dividing by duration in months.
- The annualized income for Mr. Jones' short tax year return was $48,000.
Entities Adopting Calendar Tax Year
- Taxpayers who keep no books or records must use the calendar year.
- Tax shelters must use the calendar year.
End of Tax Year
- The end of a tax year cannot be April 15th.
- Acceptable ends of tax years include the last day of any month other than December and 52- to 53-week periods.
Tax Year Eligibility
- A fiscal year (other than a 52- to 53-week tax year) that ends on any day other than the last day of the month is not an acceptable tax year.
- 52- to 53-week tax years are acceptable if they end on the same day of the week each year.
- Short tax years that occur due to accounting period changes are acceptable.
- Taxpayers that have not been in business for an entire year can have a short year.
Entity with Most Flexibility in Choosing Accounting Period
- C corporations have the most flexibility in choosing an accounting period.
- Other entities, such as S-corporations, partnerships, and personal service corporations, have more restricted options.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
This quiz covers the requirements for adopting a fiscal tax year with IRS approval, highlights the importance of accurate record-keeping, and explains the calculation of short period returns. It includes examples of adjusted gross income and deductions to clarify the annualization process.
