Tax Guru – Ker$tetter Letter

Q-1:

Subject: Choosing a fiscal year

Hello Tax Guru,

I was not sure if I can post on your blog, I had a question about Fiscal year and S-Corp. Is there no situation where an S-Corp can have a fiscal year end on June 30th like you suggest for other corporations or am I misunderstanding the S-Corp?

thanks, great blog!

 A-1:

 S corps are required to use the same tax year as their shareholders, which is almost always a calendar (December 31) year.

If income shifting between years is a critical factor, a C corp is an easy way to accomplish this.

Your personal professional tax advisor should be able to help you set up a structure with one or more entities to achieve whatever goal you have.

Good luck.

Kerry Kerstetter

Q-2:

 Kerry,

thanks for the great info. Our challenge is that we are receiving a product order prepayment from the US DOD for $250K and may not have to pay our factory till after Jan 1st. 2009 and we don’t want to pay taxes on the $250K sitting in the bank, what would you do?

Will will apply for S-Corp status with IRS.

thanks for your help!

A-2:

Using a C corp to smooth out that income and have control over the timing of the taxes on it is a very simple task for any experienced professional tax advisor.  You need to start working with one ASAP.

Good luck.

Kerry Kerstetter

Follow-Up:

 Thanks again Kerry!