S-CORP FISCAL YEAR-END HELP

Technical topics regarding tax preparation.
#1
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Hello!

I don't have many FYE tax clients. I have an S-Corp that operates a small school. We just filed their 2022 12/31 S-Corp return. They approached me about changing to a fiscal year of 7/1 - 6/30. They want to do this because it coincides with their school year and will be easier from an internal reporting standpoint as per the controller.

(1) What is the process and timing of doing this? I've read Rev Proc 2006-46 and I believe I will have to do the election through Form 1128.

(2) We will have to file a stub return for 1/1 - 6/30. Does this get reported on SH 2023 Tax Return?

(3) If the election is approved, does the 7/1/23 - 6/30/24 1120S K-1 go on the shareholder's 2024 tax return?

(4) Do we have grounds for automatic approval through Form 1128?

(5) What are the due dates for the extension and return based on the above - 9/15 and 3/15 I presume?

(6) Anything else I'm missing that should be considered?
 

#2
Big E  
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If your client is a school - an educational institution - why hasn't it previously applied for tax exempt status under
501(c)(3) status. Application for that is on Form 1023.
 

#3
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Big E wrote:If your client is a school - an educational institution - why hasn't it previously applied for tax exempt status under
501(c)(3) status. Application for that is on Form 1023.


Perhaps it’s a for-profit school?
 

#4
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Correct, it is a for-profit, boutique, and extremely limited school. Not a school in a traditional sense but more of a "learning center."
 

#5
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The rules for fiscal years on S corps are such that I highly doubt your client will qualify, and this is not a situation where automatic approval is granted. I'm assuming that the 25% rule for a natural business year wouldn't apply for them.

If they really want a June year end they would expect to be a C corp.
 

#6
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petethecpa wrote:
(1) What is the process and timing of doing this? I've read Rev Proc 2006-46 and I believe I will have to do the election through Form 1128.

(2) We will have to file a stub return for 1/1 - 6/30. Does this get reported on SH 2023 Tax Return?

(3) If the election is approved, does the 7/1/23 - 6/30/24 1120S K-1 go on the shareholder's 2024 tax return?

(4) Do we have grounds for automatic approval through Form 1128?

(5) What are the due dates for the extension and return based on the above - 9/15 and 3/15 I presume?

(6) Anything else I'm missing that should be considered?


I'll try to get the conversation going on this one.
1. Maybe someone else can answer, I have never personally made the election, just inherited fiscal year entities.
2. That would be my thought, and yes, it would go on shareholder's 2023 return.
3. Yes
4. Not sure, see my #1 above.
5. Yes.
6. Client may have to pay in a deposit (required payment) to the IRS and file a Form 8752 each year to adjust that deposit amount.
 

#7
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missingdonut wrote:The rules for fiscal years on S corps are such that I highly doubt your client will qualify, and this is not a situation where automatic approval is granted. I'm assuming that the 25% rule for a natural business year wouldn't apply for them.

If they really want a June year end they would expect to be a C corp.


Agreed.
~Captcook
 

#8
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Thank you all so much for the assistance and response. I've told my client about the added measure that would need to be taken and I think they are going to opt against the change to FYE. Thanks again.
 


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