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Rev. Proc. 99-17, 1999-1 C.B. 503, and

cents when adding the amounts and round off

and Pub. 583, Starting a Business and

sections 475(e) and (f).

only the total.

Keeping Records.

If the RIC owes tax when it files Form

Change in accounting method

Recordkeeping

1120-RIC, do not include the payment

To change its method of accounting used to

Keep the RIC’s records for as long as they may

with the tax return. Instead, mail or

CAUTION

report taxable income (for income as a whole

be needed for administration of any provision

deliver the payment with Form 8109 to an

or for any material item), the RIC must file

of the Internal Revenue Code. Usually, records

authorized depositary or use EFTPS, if

Form 3115, Application for Change in

that support an item of income, deduction, or

applicable.

Accounting Method. For more information, see

credit on the return must be kept for 3 years

Form 3115 and Pub. 538, Accounting Periods

from the date the return is due or filed,

Estimated Tax Payments

and Methods.

whichever is later. Keep records that verify the

Generally, the following rules apply to the

Section 481(a) adjustment. The RIC may

RIC’s basis in property for as long as they are

RIC’s payments of estimated tax.

have to make an adjustment to prevent

needed to figure the basis of the original or

•

amounts of income or expenses from being

replacement property.

The RIC must make installment payments of

duplicated. This is called a section 481(a)

estimated tax if it expects its total tax for the

The RIC should keep copies of all filed

adjustment. The section 481(a) adjustment

year (less applicable credits) to be $500 or

returns. They help in preparing future and

period is generally 1 year for a net negative

more. For estimated tax purposes, the

amended returns.

adjustment and 4 years for a net positive

estimated tax of the RIC is defined as its

adjustment. However, a RIC may elect to use a

alternative minimum tax less the credit for

Depository Method of Tax

1-year adjustment period if the net section

Federal tax on fuels.

•

Payment

481(a) adjustment for the change is less than

The installments are due by the 15th day of

$25,000. The RIC must complete the

the 4th, 6th, 9th, and 12th months of the tax

A RIC must pay the tax due in full no later than

appropriate lines of Form 3115 to make the

year. If any date falls on a Saturday, Sunday,

the 15th day of the 3rd month after the end of

election.

or legal holiday, the installment is due on the

the tax year. The two methods of depositing

next regular business day.

Include any net positive section 481(a)

income taxes, including capital gains tax, are

•

Use Form 1120-W, Estimated Tax for

adjustment on Form 1120-RIC, line 7. If the net

discussed below.

Corporations, as a worksheet to compute

section 481(a) adjustment is negative, report it

Electronic Deposit Requirement

estimated tax.

on Form 1120-RIC, line 22.

•

If the RIC does not use EFTPS, use the

The RIC must make electronic deposits of all

deposit coupons (Forms 8109) to make

Accounting Periods

depository taxes (such as employment tax,

deposits of estimated tax.

excise tax, and income tax) using the

A RIC must figure its taxable income on the

For more information, including penalties

Electronic Federal Tax Payment System

basis of a tax year. A tax year is the annual

that apply if the RIC fails to make required

(EFTPS) in 2005 if:

accounting period a RIC uses to keep its

•

payments, see the Line 29 – Estimated Tax

The total deposits of such taxes in 2003

records and report its income and expenses.

Penalty instructions.

were more than $200,000 or

RICs can use a calendar year or a fiscal year.

•

The RIC was required to use EFTPS in

Overpaid estimated tax

For more information about accounting

2004.

periods, see Regulations section 1.441-1,

If the RIC overpaid estimated tax, it may be

If the RIC is required to use EFTPS and

1.441-2, and Pub. 538.

able to get a quick refund by filing Form 4466,

fails to do so, it may be subject to a 10%

Corporation Application for Quick Refund of

penalty. If the RIC is not required to use

Calendar year

Overpayment of Estimated Tax. The

EFTPS, it may participate voluntarily. To enroll

If the calendar year is adopted as the annual

overpayment must be at least 10% of the

in or get more information about EFTPS, call

accounting period, the RIC must maintain its

expected income tax liability and at least $500.

1-800-555-4477 or 1-800-945-8400. To enroll

books and records and report its income and

To apply for a quick refund, file Form 4466

online, visit

expenses for the period from January 1

before the 16th day of the 3rd month after the

Depositing on Time. For EFTPS deposits to

through December 31 of each year.

end of the RIC’s tax year, but before the RIC

be made timely, the RIC must initiate the

files its income tax return. Form 4466 must be

Fiscal year

transaction at least one business day before

filed before the end of the RIC’s tax year.

the date the deposit is due.

A fiscal year is 12 consecutive months ending

on the last day of any month except December.

Interest and Penalties

Deposits With Form 8109

A 52-53 week year is a fiscal year that varies

If the RIC does not use EFTPS, deposit RIC

from 52 to 53 weeks.

Interest

income tax payments (and estimated tax

Adoption of tax year

payments) with Form 8109, Federal Tax

Interest is charged on taxes paid late even if an

Deposit Coupon. If you do not have a

extension of time to file is granted. Interest is

A RIC adopts a tax year when it files its first

preprinted Form 8109, use Form 8109-B to

also charged on penalties imposed for failure

income tax return. It must adopt a tax year by

make deposits. You can get this form by calling

to file, negligence, fraud, substantial valuation

the due date (not including extensions) of its

1-800-829-4933. Be sure to have your EIN

misstatements, and substantial

first income tax return.

ready when you call.

understatements of tax from the due date

Change of tax year

(including extensions) to the date of payment.

Do not send deposits directly to an IRS

The interest charge is figured at a rate

office; otherwise, the RIC may have to pay a

Generally, a RIC must get the consent of the

determined under section 6621.

penalty. Mail or deliver the completed Form

IRS before changing its tax year by filing Form

8109 with the payment to an authorized

1128, Application To Adopt, Change, or Retain

Penalty for late filing of return

depositary (such as, a commercial bank or

a Tax Year. However, under certain conditions,

A RIC that does not file its tax return by the

other financial institution authorized to accept

a RIC may change its tax year without getting

Federal tax deposits). Make checks or money

due date, including extensions, may be

the consent.

penalized 5% of the unpaid tax for each month

orders payable to the depositary.

For more information on change of tax year,

or part of a month the return is late, up to a

If the RIC prefers, it may mail the coupon

see Form 1128, Regulations section 1.442-1,

maximum of 25% of the unpaid tax. The

and payment to Financial Agent, Federal Tax

and Pub. 538.

minimum penalty for a return that is over 60

Deposit Processing, P.O. Box 970030, St.

days late is the smaller of the tax due or $100.

Louis, MO 63197. Make the check or money

Rounding Off to Whole

The penalty will not be imposed if the RIC can

order payable to “Financial Agent.”

show that the failure to file on time was due to

Dollars

To help ensure proper crediting, write the

reasonable cause. RICs that file late must

A RIC may round off cents to whole dollars on

RIC’s EIN, the tax period to which the deposit

attach a statement explaining the reasonable

its return and schedules. If the RIC does round

applies, and “Form 1120-RIC” on the check or

cause.

to whole dollars, it must round all amounts. To

money order. Be sure to darken the “1120” box

Penalty for late payment of tax

round, drop amounts under 50 cents and

under “Type of Tax” and the appropriate

increase amounts from 50 cents to 99 cents to

“Quarter” box under “Tax Period” on the

A RIC that does not pay the tax when due

the next dollar (for example, $1.39 becomes $1

coupon. Records of these deposits will be sent

generally may be penalized

of 1% of the

and $2.50 becomes $3).

to the IRS.

unpaid tax for each month or part of a month

If two or more amounts must be added to

For more information on deposits, see the

the tax is not paid, up to a maximum of 25% of

figure the amount to enter on a line, include

instructions in the coupon booklet (Form 8109)

the unpaid tax. The penalty will not be imposed

-5-

Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - 2004 Page 5

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