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Archive for the ‘Fiscal Year’ Category

Choosing A Fiscal Year

Posted by taxguru on August 23, 2011

Q:

Subject: Fiscal year question

HI Kelly, I went to your site about Choosing Fiscal Year. I have a question if you can help me. I have a new LLC created on 5/17/11. Recently I applied IRS online for EIN. Calender year is a defult on this so I have to elect Fiscal year now with form 1128. My question is can I elect 6/30 year end although 5/17/11 is the creation of the LLC?

Thanks

A:

You really shouldn’t be setting up new business entities without the assistance of a professional tax advisor.  It’s all too easy to make mistakes that may be impossible to remedy later on.

In this example, there are a few misconceptions you already have that an experienced tax pro would have alerted you to.

If you are choosing to have your LLC taxed as a C corp, you can choose the end of any month to be its fiscal year end, regardless of when it was chartered.

For example, if you want June 30 to be the fiscal year-end, that’s your right to choose.  You would need to file the initial 1120 covering all of the activity for the period from 5/17/11 through 6/30/11.  This 1120, or an extension (Form 7004), would be due 9/15/11.  You need to file that 1120 even if no actual activity took place or IRS will assume that you made millions of dollars.

When you have a brand new C corp, it has no set fiscal year-end, so the initial 1120 becomes the official notification to IRS of that fact. This is even if you used December 31 on the SS-4.

You do not need to file Form 1128 to designate the tax year for a new corp that has not filed any 1120s.  Here is a direct excerpt from Page 1 of the 1128 instructions:

Exceptions
Do not file Form 1128 in the following circumstances.

Corporations

• A corporation adopting its first tax year.

Good luck.  I hope this helps.

Kerry Kerstetter

 

TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!

Posted in corp, Fiscal Year, LLC | Comments Off on Choosing A Fiscal Year

Corp Fiscal Year Selection

Posted by taxguru on July 24, 2011


Q:

Subject: Blog: Fiscal Year End

Hello TaxGuru,  

Love your blog. Read your article on Choosing a Fiscal Year (posted Jan. 2010), and was hoping you could answer a question for me. I started a business in March 2011, incorporated in Delaware, and operate as a foreign stock corporation in California. On the EIN, I (predictably) chose December 31st as the end of my fiscal year. Your blog suggests June 30 as the ideal corporate year-end date. Aside from the 1128 form you listed, is there anything else I would need to do to make this change? (i.e, amend articles of incorporation? File anything with Delaware and California?). Would really appreciate your advice.  

Respectfully,

  Aspiring 25 year old entrepreneur  

A:

You should be working with a professional tax advisor; especially one who is experienced with multi-state corporate taxation.  It is very easy to screw things up and get into big trouble with the FTB.

As I have said in multiple articles, the fiscal year for a brand new C corp is not officially established with IRS until you file the first 1120 with them, regardless of what you may have entered on the SS-4. You don’t need to send them anything other than your first 1120, or the extension (7004), for the FYE 6/30/11 by 9/15/11.

Good luck.

Kerry Kerstetter

Follow-Up:

Thank you Kerry. Much appreciated!

 

TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!

 

Posted in corp, Fiscal Year | Comments Off on Corp Fiscal Year Selection