Publication 538 - Accounting Periods And Methods (Page 4 of 19) in pdf

not meet the requirements for a calendar or

1128. The time for filing Form 1128 depends on

2001, she will have changed her accounting

fiscal tax year.

whether you are a business entity or an individ-

period to a fiscal year ending June 30. Then she

ual. Do not file Form 1128 with the IRS national

and John can file a joint return for their tax year

To change to a proper tax year, you must do

office to get automatic approval. No user fee is

ending June 30, 2002.

one of the following.

required.

•

Spouses other than newlyweds.

File an amended income tax return based

Corporations and pass-through entities. To

spouse who does not meet the earlier conditions

on a calendar year, if you meet the re-

get approval to change your tax year under the

must get IRS approval to change to the other

quirements of Revenue Procedure 85 – 15

automatic approval procedures for certain cor-

spouse’s tax year in order to file a joint return.

in Cumulative Bulletin 1985 – 1. Attach a

porations and pass-through entities, file a Form

The spouse wishing to change tax years gener-

completed Form 1128 to the amended

1128 with the Director, Internal Revenue Serv-

ally needs to file Form 1128 and follow the pro-

tax return. Write “FILED UNDER REV.

ice Center, Attention: ENTITY CONTROL,

cedures in section 1.442 – 1(b) of the

PROC. 85 – 15” at the top of Form 1128

where your return is filed by the due date (includ-

regulations.

and file the forms with the Internal Reve-

ing extensions) of the tax return for the short

nue Service Center where you filed your

period. See Revenue Procedures 2002 – 37 and

Partnerships,

original return.

2002 – 38 in Internal Revenue Bulletin 2002 – 22.

•

S Corporations,

Request IRS approval to change to a tax

See also Automatic approval, later, under Part-

and Personal Service

year other than a calendar year.

nerships, S Corporations, and Personal Service

Corporations and Corporations.

Corporations

Change in Tax Year

Individuals. If you can get approval to change

Generally, partnerships, S corporations (includ-

your tax year under the automatic approval pro-

ing electing S corporations), and personal serv-

You must, with certain exceptions, get IRS ap-

cedures for individuals, file a Form 1128 with the

ice corporations must use a “required tax year.”

proval to change your tax year. You can apply

Director, Internal Revenue Service Center,

A required tax year is a tax year that is required

for approval using Form 1128.

where your return is filed by the 15th day of the

under the Internal Revenue Code and Income

2nd calendar month after the close of the short

Tax Regulations. The entity does not have to

tax year. See Revenue Procedure 66 – 50 in

Non-Automatic Approval

use the required tax year if it establishes a busi-

Cumulative Bulletin 1966 – 2, and Revenue Pro-

ness purpose for a different tax year, makes an

cedure 81 – 40 in Cumulative Bulletin 1981 – 2.

File a current Form 1128 with the IRS national

election under section 444, or elects to use a

Husband and wife. A husband and wife

office no earlier than the day following the end of

52-53-week tax year that ends with reference to

who have different tax years cannot file a joint

the short period and no later than the due date

either its required tax year or a tax year elected

return. However, there is an exception to this

(not including extensions) of the tax return for

under section 444. These issues are discussed

rule if their tax years begin on the same date and

the short period. (The short period begins on the

later.

end on different dates because of the death of

first day after the end of your present tax year

either or both. If a husband and wife want to use

and ends on the day before the first day of your

the same tax year so they can file a joint return,

new tax year.) You must include the correct user

Partnership

the method of changing a tax year depends on

fee, if any, with Form 1128. See User fees at the

whether they are newly married.

A partnership must conform its tax year to its

beginning of this publication. See also Revenue

partners’ tax years unless the partnership can

Procedure 2002 – 39 in Internal Revenue Bulle-

Special rule for newlyweds. A newly mar-

establish a business purpose for a different pe-

tin 2002 – 22, for the address to which Form

ried husband and wife with different tax years

1128 should be sent.

riod, makes a section 444 election, or elects to

who wish to file a joint return can get automatic

use a 52-53-week tax year that ends with refer-

A Form 1128 received within 90 days after

approval to change the tax year of one spouse.

ence to either its required tax year or a tax year

the due date may qualify for an extension and be

They can file a joint return for the first tax year

elected under section 444. The rules for the

considered timely filed. For more information,

ending after the date of marriage if both of the

required tax year for partnerships are as follows.

see the form instructions and Revenue Proce-

following conditions are met.

dure 2003 – 1 in Internal Revenue Bulletin

•

If one or more partners having the same

The due date for filing the required sepa-

2003 – 1 (or any successor).

tax year own a majority interest (more

rate short period tax return of the spouse

Your application must contain all requested

changing tax years falls on or after the

than 50%) in partnership profits and capi-

information. Do not change your tax year until

date of the marriage. The due date for the

tal, the partnership must use the tax year

the IRS has approved your request.

short period tax return is the 15th day of

of those partners.

If your application is approved, you must file

the 4th month following the end of the

•

If there is no majority interest tax year, the

an income tax return for the short period. There

short tax year.

partnership must use the tax year of all its

are special rules for figuring tax when you file a

•

The spouse changing tax years files a

principal partners. A principal partner is

short period return because you changed your

timely short period tax return. It must in-

one who has a 5% or more interest in the

tax year. See Figuring Tax for Short Year, ear-

clude a statement that the tax year is be-

profits or capital of the partnership.

lier.

ing changed under section 1.442 – 1(d) of

•

If there is no majority interest tax year and

the regulations. (The spouse changing tax

Example. Steve Adams, a sole proprietor,

the principal partners do not have the

years does not have to file Form 1128.)

files his return using a calendar year. For busi-

same tax year, the partnership generally

ness purposes, he wants to change his tax year

must use a tax year that results in the

If the due date for filing the required short

to a fiscal year ending June 30. Steve will have a

least aggregate deferral of income to the

period tax return passed before the date the

short tax year for the period from January 1 to

partners.

couple marries, they cannot file a joint return

June 30. The date by which Steve must file Form

until the end of the second tax year after the date

1128 depends on whether he can get automatic

If a partnership changes to a required tax year

of marriage. They can file a joint return for the

approval to change his tax year. He cannot get

because of these rules, it can get automatic

second tax year only if the spouse changing his

automatic approval. He must file Form 1128 by

approval to do so. It must file a Form 1128 with

or her tax year files a timely short period tax

October 15, the 15th day of the 4th calendar

the Director, Internal Revenue Service Center,

return.

month after the close of the short tax year, which

Attention: ENTITY CONTROL, where it files its

is the due date for the short period return.

tax returns and it must attach a copy of the Form

Example. John and Jane were married on

1128 to its return. In order to assist in the

July 30, 2001. John filed his return for the fiscal

processing of the change, the partnership

year ending June 30, 2001. Jane uses the calen-

Automatic Approval

should write at the top of page 1 of Form 1128,

dar year, but wants to change to John’s fiscal

“FILED UNDER REV. PROC. 2002 – 38.” The

Certain taxpayers can get automatic approval to

year so they can file a joint return. If Jane files a

change their tax year. Even though they can get

separate return by October 15, 2001, for the

Form 1128 is due by the due date (including

automatic approval, they must still file Form

short period January 1, 2001, through June 30,

extensions) for filing the short period tax return.

Page 4

Publication 538 - Accounting Periods And Methods Page 4

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