You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. A tax year is usually 12 consecutive months. There are two kinds of tax years.
If you operate a business as a sole proprietor, the tax year for your business must be the same as your individual tax year. Special rules apply to S corporations and partnerships.
For more information, contact us.
First-time filer. If you have never filed an income tax return, you can choose either a calendar tax year or a fiscal tax year, subject to the limitations stated above. You must choose a tax year by the time set by law, not including extensions, for filing your first return.
You must use a calendar tax year if you have inadequate records or you have no accounting period, or your annual accounting period does not qualify as a fiscal year.
Changing your tax year. Once you have chosen your tax year, you may have to get IRS approval to change it. To get approval, you must file Form 1128. You may have to pay a fee.
It is important to correctly select your tax year at the beginning of your business. It is difficult, costly, and sometimes not possible to change a tax year later. Consideration of the appropriate tax year is included in our corporation packages.
Related items:
Accounting Methods
Federal Tax Identification Numbers
© Copyright 2000 Raymond S. Kulzick. All rights reserved. 001029.
This publication provides business, financial planning, and/or tax information to our clients. All material is for general information only and should not be acted upon without seeking appropriate professional assistance.