ISSUE:

How does an organization that does not file a Form 990-series return inform the IRS of a change in accounting period?

 

SITUATION:

Idaho Bible College & Seminary (IBCS) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(ii).  IBCS is also classified by the IRS as an “integrated auxiliary of a Church as described in section 1.6033-2(h) of the Treasury Regulations” and, therefore, not required to file Form 990.

Their CFO calls us to say that IBCS is changing their year end from December 31 to June 30.  She asks how they are to inform the IRS of the year end change.

We tell her that – of several choices – the best method might be to file Form 1128, Application To Adopt, Change, or Retain a Tax Year.

 

RULES:

From 2016 Form 990 instructions:

Accounting period change.

If the organization changes its accounting period, it must file a Form 990 for the short period resulting from the change. Write “Change of Accounting Period” at the top of this short-period return.

If the organization has previously changed its annual accounting period at any time within the 10-calendar-year period that includes the beginning of the short period resulting from the current change in accounting period, and it had a Form 990-series filing requirement or income tax return filing requirement at any time during that 10-year period, it must also file a Form 1128, Application To Adopt, Change, or Retain a Tax Year, with the short-period return. See Rev. Proc. 85-58, 1985-2 C.B. 740.

If an organization that submits Form 990-N changes its accounting period, it must report this change on Form 990, Form 990-EZ, or Form 1128, or by sending a letter to Internal Revenue Service, 1973 Rulon White Blvd., Ogden, Utah 84201.

From Form 1128 instructions (Rev. October 2014):

When To File 

To request a ruling to adopt, change, or retain a tax year, file Form 1128 by the due date (not including extensions) of the federal income tax return for the first effective year. Do not file earlier than the day following the end of the first effective year. In the case of a change in tax year, the first effective year is the short period required to effect the change.

 

BOTTOM LINE:

  • There is a provision for an “automatic” year-end change for most institutions.
  • Generally, a “short-period” return will be required (even though you may receive audited financial statements for a period greater than twelve months).
  • Institutions that do not file Form 990 may inform the IRS by filing a return, filing Form 1128, or by sending a letter to the IRS.
  • Be sure to closely follow the instructions to Form 1128.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.