In: Accounting
Q1. A business entity generally need IRS approval to change accounting period. What are the provisions of getting IRS approval for changing the accounting period? Explain.
PLZ SHORT ANSWER NO HAND WRITING OR PIC
SOLUTION
Introduction
The Internal Revenue Service counts a year as the one it established in the first year of operation.
In order to change the accounting period,
An amended return with a request to change year.
A mere filing an application for extension or apply for a new taxpayer identification number to change your tax year starting and ending dates does not make the changes.
Following process needs to be followed.
1) Fill out form 1128 to request a change in tax year .
2)The IRS requires you ask for a "Ruling Request" on this form as part of its criteria to approve a fiscal year change.
3) Mail your completed form 1128 to the National IRS office at: Internal Revenue Service Associate Chief Counsel, PO Box 7604,Ben Franklin Station, Washington, D.C., 20044-7604. (Ask for a ruling request if you are not eligible for automatic approval. Attach form 1128 to your amended return.)
Auto Automatic Approval.
There are some organizations which need not apply for change in the accounting year.
Provided they satisy the following conditions.
1) . It must not have not changed its accounting period in the previous 48 months.
2) It must have no interest in a pass-through entity, such as an LLC.
3) It must not be a shareholder in a foreign sales corporation or an interest charge domestic international sales corporation.
4) It cannot be a personal service corporation, or be part of a combined federal campaign.
5) The corporation requesting the fiscal year change cannot be part of a consolidated group it is using