Accounting

To report your Income and expenses, the taxpayer must adopt a tax year or an annual accounting period, which can be a 52-53-week, a calendar year of 12 successive months, or a fiscal year. According to the internal Revenue Code, taxpayers are required to file their first income tax return in a particular tax year. An improper tax year may apply to specific situations regarding individuals and corporations and limitations may apply to accounting periods of some partnerships and corporations.

Qualifying individual taxpayers or small businesses requesting a change of method to account for inventories and supplies or a change to the accrual method, can make these changes by applying under the automatic change of Revenue Procedure. A user fee may be attached to certain requests to change an accounting period or method. No charges are imposed on permitted or published automatic procedure changes.

Individuals requesting a tax year change must get approval under automatic approval or ruling request procedures. Married couples with different tax years are not permitted to file joint returns, except for the circumstance of death of one or both people involved. However, recent married couples with different tax years, are permitted to change his or her tax year status to coincide with the other person in order to file a joint return. The person making the change can file a joint return the first year after the date of the marriage, providing certain conditions are met.

Most individuals adopt the calendar year, but a fiscal year can also be adopted provided records are maintained on the basis of the adopted fiscal year. Individuals requesting a change in the tax year must get approval under the automatic approval or ruling request procedures. Recently married couples whose tax years are different are not permitted to file jointly, unless the disparity is due to death of either or both people. A couple married in recent times and have different tax years are permitted to change his or her tax year to coincide with the other spouse in order to file a joint return. The person making the change the first tax year following the date of marriage, providing conditions are met, must file the joint return.

A taxpayer currently using an annual accounting period or calendar tax year, 12 successive months, are required to maintain records and report income and expenses for this period. Anyone starting a business when currently using the calendar year must continue, unless you are permitted to change to a different tax year. No change can be made without the approval if the IRS. Those who do not keep books, have no annual accounting period or does not qualify to use a fiscal year, are required to use the a calendar year under the Internal Revenue Code.

A fiscal year is 12 successive months ending on the last day of any month, except December. A 52-53-week tax year is a fiscal year that varies from 52 to 53 weeks but may not end on the last day of a month. Books and records must be maintained and income and expenses are reported using this tax year. A 52-53-week tax year must include all necessary information to determine a proper tax year.

A Taxpayer who adopted an improper tax year is required to change to a proper tax year under the provisions of Revenue Procedure. To make the change, the taxpayer must request a calendar tax year change by filing an amended tax return based on a tax year that corrects the most recently tax return. Those seeking a fiscal tax year change must request authorization for the change. Automatic approval for a tax year change is granted to certain qualified individuals, entities and corporations by submitting a ruling request application. Once the approval is granted and you qualify for an automatic approval, a user fee is not imposed, but a user fee is required for a Ruling Request.

A short tax year is less than 12 months. An entity that has not been in business 12 months are required to file a short-period tax return for the time the business existed. Even though a short period tax return is figured differently for each situation, the requirements are usually the same as for a full tax period, or to change an accounting period. Income tax for a short tax year is measured on an annual basis using the itemize deduction option. Federal income tax withheld from wages is allowed as a credit according to the calendar tax year. However, self-employment tax is figured on the actual self-employment income for the short period. Alternative minimum tax must also be calculated.

A Ruling Request must be filed the day following the end of the short period and before the due date of the tax return for the short period. A return for the short period must be filed within the time that applies for a full tax year and under the guidelines which modifies the restrictions in revenue procedure against carrying back net operating losses and capital losses generated in the short period. You must include the correct user fee, if required. If your application is approved, you must file an income tax return for the short period. There are special rules for calculating tax when you file a short period return because you changed your tax year. You must not change your tax year until the IRS has approved your request.