Publication 538 - Accounting Periods And Methods (Page 2 of 19) in pdf

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clude your daytime phone number, including the

A change in tax year.

1) The month in which the new 52-53-week

area code, in your correspondence.

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Restrictions that apply to the accounting

tax year ends.

period of a partnership, S corporation, or

Useful Items

2) The day of the week on which the tax year

personal service corporation.

always ends.

You may want to see:

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Special situations that apply to corpora-

3) The date the tax year ends. It can be ei-

tions.

Publication

ther of the following dates on which the

chosen day:

537

Installment Sales

Calendar Year

541

Partnerships

a) Last occurs in the month in (1), above,

A calendar year is 12 consecutive months be-

542

Corporations

ginning January 1 and ending December 31.

b) Occurs nearest to the last day of the

Form (and Instructions)

If you adopt the calendar year, you must

month in (1), above.

maintain your books and records and report

1128 Application To Adopt, Change, or

your income and expenses from January 1

When you figure depreciation or amortiza-

Retain a Tax Year

through December 31 of each year.

tion, a 52-53-week tax year is generally consid-

3115 Application for Change in

If you file your first tax return using the calen-

ered a year of 12 calendar months.

Accounting Method

dar tax year and you later begin business as a

To determine an effective date (or apply pro-

sole proprietor, become a partner in a partner-

visions of any law) expressed in terms of tax

See How To Get Tax Help near the end of

ship, or become a shareholder in an S corpora-

years beginning, including, or ending on the first

this publication for information about getting

tion, you must continue to use the calendar year

or last day of a specified calendar month, a

these publications and forms.

unless you get IRS approval to change it or are

52-53-week tax year is considered to:

otherwise allowed to change it without IRS ap-

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Begin on the first day of the calendar

proval. See Change in Tax Year, later.

month beginning nearest to the first day of

User Fees

Generally, anyone can adopt the calendar

the 52-53-week tax year, and

year. However, if any of the following apply, you

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must adopt the calendar year.

End on the last day of the calendar month

The IRS charges a user fee for certain requests

ending nearest to the last day of the

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to change an accounting period or method, cer-

You keep no books.

52-53-week tax year.

tain tax rulings, and determination letters. The

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You have no annual accounting period.

fee is reduced in certain situations and for cer-

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tain requests, such as a request for substantially

Example. Assume a tax provision applies to

Your present tax year does not qualify as

identical rulings for related entities. No fee is

tax years beginning on or after July 1, 2002. For

a fiscal year.

charged for changes permitted to be made by a

this purpose, a 52-53-week tax year beginning

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You are required to use a calendar year

published automatic change revenue proce-

on June 24, 2002, is treated as beginning on

by a provision of the Internal Revenue

dure.

July 1, 2002.

Code or the Income Tax Regulations.

See Revenue Procedure 2003 – 1, in Internal

Change to or from a 52-53-week tax year.

Revenue Bulletin No. 2003 – 1, or its successor,

You must get IRS approval if you want to make

for more information.

Fiscal Year

the following changes.

A fiscal year is 12 consecutive months ending on

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From your current tax year to a

the last day of any month except December. A

52-53-week tax year, even if such

Accounting Periods

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

52-53-week tax year ends with reference

from 52 to 53 weeks but may not end on the last

to the same calendar month as your cur-

day of a month.

You must figure taxable income on the basis of a

rent tax year.

tax year. A “tax year” is an annual accounting

If you adopt a fiscal year, you must maintain

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From one 52-53-week tax year to another

period for keeping records and reporting income

your books and records and report your income

52-53-week tax year.

and expenses. The tax years you can use are:

and expenses using the same tax year.

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From a 52-53-week tax year to any other

A calendar year.

tax year.

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52-53-Week Tax Year

A fiscal year.

See Change in Tax Year, later, for information

You can elect to use a 52-53-week tax year if

on getting IRS approval.

Unless you have a required tax year, you

you keep your books and records and report

adopt a tax year by filing your first income tax

Example. You want to change from a calen-

your income and expenses on that basis. If you

return using that tax year. A required tax year is

dar year to a 52-53-week tax year ending on the

make this election, your 52-53-week tax year

a tax year required under the Internal Revenue

Friday closest to December 31. You must get

must always end on the same day of the week.

Code and the Income Tax Regulations. You

IRS approval to make this change in your tax

Your 52-53-week tax year must always end on:

have not adopted a tax year if you merely did

year.

any of the following.

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Whatever date this same day of the week

Automatic approval. You can get approval

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last occurs in a calendar month, or

Filed an application for an extension of

for certain 52-53-week tax year changes auto-

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time to file an income tax return.

Whatever date this same day of the week

matically if you qualify under any of the follow-

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falls that is nearest to the last day of the

ing.

Filed an application for an employer identi-

calendar month.

fication number.

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Revenue Procedure 2002 – 37, which pro-

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Paid estimated taxes for that tax year.

vides automatic approval procedures for

For example, if you elect a tax year that al-

certain corporations.

ways ends on the last Monday in March, your

This section discusses:

2001 tax year will end on March 25, 2002. If you

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Revenue Procedure 2002 – 38, which pro-

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elect a tax year ending on the Thursday nearest

vides automatic approval procedures for

A calendar year.

to the end of April, your 2001 tax year will end on

certain partnerships, S corporations, elect-

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A fiscal year (including a period of 52 or

April 25, 2002.

ing S corporations, and personal service

53 weeks).

corporations.

Election. To make the election, attach a state-

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A short tax year.

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ment with the following information to your tax

Revenue Procedure 66 – 50, as modified

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An improper tax year.

return for the 52-53-week tax year.

by Revenue Procedure 81 – 40, which pro-

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Publication 538 - Accounting Periods And Methods Page 2

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