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Percentage-of-completion method.

If the “Yes” box is checked, the

Accrual method. Generally, a

Long-term contracts (except for certain

cooperative is authorizing the IRS to call

cooperative must use the accrual method

real property construction contracts) must

the paid preparer to answer any

of accounting if its average annual gross

generally be accounted for using the

questions that may arise during the

receipts exceed $5 million. For details,

percentage-of-completion method

processing of its return. The cooperative

see section 448(c). Generally, a

described in section 460. See section 460

is also authorizing the paid preparer to:

cooperative engaged in farming

•

Give the IRS any information that is

operations also must use the accrual

and the regulations for general rules on

long-term contracts.

missing from the return,

method. For exceptions, see section 447.

•

Call the IRS for information about the

Completed crop pool method of

If inventories are required, the accrual

processing of the return or the status of

accounting. Cooperatives may be able

method generally must be used for sales

any related refund or payment(s), and

to use the completed crop pool method of

•

and purchases of merchandise. However,

Respond to certain IRS notices that the

accounting for crop pools opened before

qualifying taxpayers and eligible

cooperative has shared with the preparer

March 1, 1978. See section 1382(g) for

businesses of qualifying small business

about math errors, offsets, and return

more information.

taxpayers are excepted from using the

preparation. The notices will not be sent

Change in accounting method. To

accrual method and may account for

to the preparer.

change its method of accounting used to

inventoriable items as materials and

The cooperative is not authorizing the

report taxable income (for income as a

supplies that are not incidental. See Cost

paid preparer to receive any refund

whole or for the treatment of any material

of Goods Sold on page 14.

check, bind the cooperative to anything

item), the cooperative must file Form

(including any additional tax liability), or

Under the accrual method, an amount

3115, Application for Change in

otherwise represent the cooperative

is includible in income when:

Accounting Method. For more

before the IRS. If the cooperative wants

information, see Form 3115 and Pub.

1. All the events have occurred that fix

to expand the paid preparer’s

538, Accounting Periods and Methods.

the right to receive the income, which is

authorization, see Pub. 947, Practice

the earliest of the date: (a) the required

Section 481(a) adjustment. The

Before the IRS and Power of Attorney.

performance takes place, (b) payment is

cooperative may have to make an

due, or (c) payment is received, and

The authorization cannot be revoked.

adjustment under section 481(a) to

2. The amount can be determined

However, the authorization will

prevent amounts of income or expense

with reasonable accuracy.

automatically end no later than the due

from being duplicated or omitted.

date (excluding extensions) for filing the

Cooperatives generally must take the

cooperative’s 2005 tax return.

section 481(a) adjustment into account in

See Regulations section 1.451-1(a) for

details.

the year of change. The cooperative must

Assembling the Return

complete the appropriate lines of Form

Generally, an accrual basis taxpayer

3115 to figure the amount of the

To ensure that the cooperative’s tax

can deduct accrued expenses in the tax

adjustment.

return is correctly processed, attach all

year when:

•

Include any net positive section 481(a)

schedules and other forms after page 5,

All events that determine the liability

adjustment on page 1, line 10. If the net

Form 990-C, in the following order.

have occurred,

•

section 481(a) adjustment is negative,

1. Form 8302.

The amount of the liability can be

report it on page 1, line 26.

2. Form 4136.

figured with reasonable accuracy, and

•

3. Form 4626.

Economic performance takes place

Accounting Periods

4. Form 851.

with respect to the expense.

5. Additional schedules in alphabetical

A cooperative must figure its taxable

There are exceptions to the economic

order.

income on the basis of a tax year. A tax

performance rule for certain items,

6. Additional forms in numerical order.

year is the annual accounting period a

including recurring expenses. See section

cooperative uses to keep its records and

461(h) and the related regulations for the

Complete every applicable entry space

report its income and expenses.

rules for determining when economic

on Form 990-C. Do not write “See

Generally, cooperatives can use a

performance takes place.

Attached” instead of completing the entry

calendar year or a fiscal year.

If all events have occurred that fix an

spaces. If more space is needed on the

For more information about accounting

item of income or expense and if the

forms or schedules, attach separate

periods, see Pub. 538.

amount of income or expense is (a)

sheets, using the same size and format

Calendar year. If the calendar year is

unknown at year end due to the lack of

as the printed forms. If there are

adopted as the annual accounting period,

timely information; and (b) determined

supporting statements and attachments,

the cooperative must maintain its books

with reasonable accuracy before the tax

arrange them in the same order as the

and records and report its income and

return filing deadline for the year

schedules or forms they support and

expenses for the period from January 1

(including extensions), then it is

attach them last. Show the totals on the

through December 31 of each year.

appropriate to accrue the amount of

printed forms. Also be sure to enter the

income or expense for the year.

Fiscal year. A fiscal year is 12

cooperative’s name and EIN on each

consecutive months ending on the last

supporting statement or attachment.

Nonaccrual experience method.

day of any month except December. A

Accrual method cooperatives whose

Accounting Methods

52-53-week year is a fiscal year that

average annual gross receipts for the 3

varies from 52 to 53 weeks.

An accounting method is a set of rules

prior tax years do not exceed $5 million,

Adoption of tax year. A cooperative

used to determine when and how income

are not required to accrue certain

adopts a tax year when it files its first

and expenses are reported. Figure

amounts to be received from the

income tax return. It must adopt a tax

taxable income using the method of

performance of services that, on the basis

year by the due date (not including

accounting regularly used in keeping the

of experience, will not be collected. This

extensions) of its first income tax return.

cooperative’s books and records. In all

provision does not apply to any amount if

cases, the method used must clearly

interest is required to be paid on the

Change in tax year. Generally, a

show taxable income. Permissible

amount or if there is any penalty for

cooperative must get the consent of the

methods include:

failure to timely pay the amount. For more

IRS before changing its tax year by filing

•

Cash,

information, see section 448(d)(5) and

Form 1128, Application To Adopt,

•

Accrual, or

Temporary Regulations section 1.448-2T.

Change, or Retain a Tax Year. However,

•

Any other method authorized by the

See Nonaccrual experience method on

under certain conditions, a cooperative

Internal Revenue Code.

page 8 for reporting requirements.

can change its tax year without getting

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Instructions For Form 990-C - Farmers' Cooperative Association Income Tax Return - Internal Revenue Service - 2004 Page 3

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