Changing your business’s accounting period requires IRS approval. This involves submitting a formal request. You’ll need to write a letter to the IRS. This letter explains why you want to change your fiscal year.
Need help with this letter? We’ve got you covered. We’ll provide sample letters. These are templates you can adapt. They make the process easier.
These samples cover various scenarios. Choose the one that fits your situation. Simplify your request with our examples.
Sample Letter To Irs To Change Accounting Period
[Your Name/Company Name]
[Your Address]
[City, State, ZIP Code]
[Date]
Internal Revenue Service
[IRS Address – Find the appropriate address on the IRS website]
[City, State, ZIP Code]
**Subject: Request to Change Accounting Period**
Dear Sir/Madam,
This letter is to formally request a change in our accounting period. Currently, our accounting period ends on [Current Accounting Period End Date]. We are requesting to change it to [Proposed Accounting Period End Date].
The reason for this change is [Clearly explain the reason for the change. Examples: to align with parent company’s fiscal year, to better reflect the business cycle, to simplify tax preparation].
We believe this change will [Explain the benefit of the change. Examples: improve financial reporting, streamline accounting processes, reduce administrative burden].
We understand that this change requires approval from the Internal Revenue Service. We have reviewed Publication 538, “Accounting Periods and Methods,” and believe we meet the requirements for this change.
We are prepared to provide any additional information or documentation you may need to process this request.
Thank you for your time and consideration.
Sincerely,
[Your Name/Title]
[Your Phone Number]
[Your Email Address]
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How to Write Letter To IRS To Change Accounting Period
Subject Line: Clarity is Paramount
The subject line is your initial communiqué with the IRS. Be exceedingly direct.
- State: “Request to Change Accounting Period”
- Include your Employer Identification Number (EIN) or Social Security Number (SSN).
- Example: “Request to Change Accounting Period – EIN: XX-XXXXXXX”
Salutation: Respect and Formality
Begin with a respectful and formal address. While familiarity might be comforting, it’s ill-advised here.
- Use: “Commissioner of Internal Revenue”
- Alternatively: “Internal Revenue Service”
- Followed by: “To Whom It May Concern:”
Introduction: State Your Purpose Concisely
Dive straight into the crux of the matter. Ambiguity is your enemy.
- Identify yourself (business name and EIN/SSN).
- State clearly that you are requesting a change in accounting period.
- Mention your current and proposed accounting periods; for instance: “We currently operate on a calendar year (January 1 to December 31) and wish to transition to a fiscal year ending on June 30.”
Justification: Articulate Your Rationale
The IRS needs to understand why you’re seeking this alteration. Provide a cogent explanation.
- Explain the business reasons for the change. This could include aligning with industry standards, improving financial reporting, or simplifying tax preparation.
- Be specific; generalities are unpersuasive. For instance, “Changing to a fiscal year ending June 30 will better align our reporting with our seasonal sales cycle, providing a more accurate depiction of our annual financial performance.”
- If applicable, reference any relevant regulations or rulings that support your request.
Compliance Statement: Assure Adherence
Reassure the IRS that you’re aware of, and intend to comply with, all pertinent regulations.
- State that you will adhere to all applicable provisions of the Internal Revenue Code and related regulations.
- Include a sentence such as: “We affirm that this change will be implemented in accordance with all applicable IRS guidelines and regulations.”
Financial Impact: Acknowledge Potential Shifts
Briefly address any potential impact on your tax liabilities. Transparency is key.
- Acknowledge that the change may affect the timing of income and deductions.
- Include a statement like: “We understand that the change in accounting period may impact the timing of our tax liabilities, and we are prepared to adjust our tax planning accordingly.”
- If you anticipate a significant shift, consider briefly outlining your plan to manage it.
Closing: Gratitude and Contact Information
End with a polite closing and ensure the IRS knows how to reach you.
- Use a professional closing such as: “Sincerely,” or “Respectfully,”
- Include your name, title, and contact information (phone number and email address).
- Consider adding a sentence expressing gratitude: “Thank you for your time and consideration of this request.”
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Frequently Asked Questions: Changing Your Accounting Period with the IRS
Changing your accounting period requires careful consideration and adherence to IRS guidelines. This FAQ addresses common questions regarding the process of requesting a change in your accounting period.
1. Why would I want to change my accounting period?
Common reasons include aligning with a parent company’s fiscal year, improving cash flow management, or simplifying tax compliance.
2. How do I request a change in my accounting period with the IRS?
You generally need to file Form 1128, Application to Adopt, Change, or Retain a Tax Year, with the IRS according to the form’s instructions.
3. Are there specific requirements for changing my accounting period?
Yes, the IRS has specific requirements based on your business entity type. You must demonstrate a substantial business purpose for the change.
4. What is Form 1128 and where can I find it?
Form 1128 is the application used to request a change in accounting period. It can be found on the IRS website (irs.gov).
5. What is the deadline for filing Form 1128?
The deadline depends on the specific circumstances of the change but is generally before the due date of the return for the short period required to effect the change.