You must figure your taxable income and file
an income tax return based on an annual acounting
period called a tax year. A tax year is
usually 12 consecutive months. There are
two kinds of tax years.
- Calendar year - A
calendar tax year is 12 consecutive
months beginning January 1 and ending
December 31.
- Fiscal year - A fiscal
tax year is 12 consecutive months ending
on the last day of any month except
December. A 52-53-week tax year is
a fiscal tax year that varies from 52 to
53 weeks but does not have to end on the
last day of a month.
If you file your first tax return using the
calendar tax year and you later begin business as
a sole proprietor, become a partner in a
partnership, or become a shareholder in an S
corporation, you must continue to use the
calendar year unless you get IRS approval to
change it or are otherwise allowed to change it
without IRS approval.
You must use a calendar tax year if:
- You keep no books.
- You have no annual accounting period.
- Your present tax year does not qualify as
a fiscal year.
- You are required to use a calendar year
by a provision of the Internal Revenue
Code or the Income Tax Regulations.
First-time filer
If you have never filed an income tax return,
you adopt either a calendar tax year or a fiscal
tax year. You adopt a tax year by filing
your first income tax return using that tax
year. You have not adopted a tax year if
you merely did any of the following.
- Filed an application for an extension of
time to file an income tax return.
- Filed an application for an employer
identification number
- Paid estimated taxes for that tax year.
Changing your tax year
Once you have adopted your tax year, you may
have to get IRS approval to change it. To
get approval, you must file Form 1128,
Application To Adopt, Change, or Retain a Tax
Year.
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