Hi – we have a c-corp small business with a year-end of June 30 and would like to change that to a calendar year. Any advice on what the procedures are?
Derek
Derek, I hope all is well. First of all, make sure that you check with your tax advisor on the wisdom of changing year-ends. We usually like to have a different corporate year-end than our personal year-end. Different reporting periods allows us to move some money back and forth between the taxing entities and therefore postpone paying tax.
For example, if the corporate income is high on June 15th, the corporation could pay a bonus to the individual prior to June 30th and get a deduction which reduces the corporate tax. The individual, on the other hand, would not have to pay tax on the bonus until April 15th of the next year when he or she files the return.
Changing year-ends is fairly easy. The IRS does not even require advanced approval to change year-ends. All you have to do is file the short year tax return.
Again, you must review this with your tax advisor because there is annualization of income that must take place, which is not a big deal but you better check it out before you file the short year return. In addition, if you have any loss carry-overs or other attributes, they might be impacted by filing for the new year-end.
Good Luck.
Larry Kopsa CPA
