Corporations vs. LLCs

Types of Ownership Structures

Choosing the Best Ownership Structure for Your Business

Limited Liability Company FAQ

Q:

Greetings Mr. Kerstetter,

 

I just stumbled upon your site the other day.  Thank you for maintaining it, it’s a great resource.

 

I wanted to ask you about your article “Choosing A Fiscal Year“.  In it, you talk about the virtues of choosing a FYE other than 12/31.  You say “once the first 1120 has been filed with IRS, the fiscal year is set in stone.”

 

I was reading on another site about Form 1128 which seems to allow you to petition the IRS for a new FYE.  Can you comment on this?

 

Best,

A:

While you are correct that there is an official form to request a change in an entity’s tax year, the actual use of it is very discriminatory.  Because of the very well known tax savings opportunities in having a non 12/31 year end, IRS will almost always grant a request to change from a year ending in any other month to 12/31; but will almost never grant a request to change from 12/31 to the end of any other month.

I don’t have any official stats on percentages of which tax year changes are granted and denied; but my 32 years of experience in this area have given me complete confidence in my conclusions.  I would welcome any comments from any readers who have had a successful track record of obtaining IRS permission to change from 12/31 tax years  to other months.  I doubt any tax pro can cite such a record because of the well known IRS policy of doing what it can to force as many taxpayers into a calendar tax year as possible.

That is why it is so important to properly select the appropriate tax year with the very first 1120 filed. 

I hope this answers your question. 

Thanks for writing.

Kerry Kerstetter