Filing IRS Form 1133 to Change Your Accounting Period

Introduction

Form 1128, Application to Adopt, Change, or Retain a Tax Year, is a request submitted to the Internal Revenue Service (IRS) to seek approval for altering a company’s accounting period for tax purposes. Corporations that meet a specific set of conditions can use this form to receive automatic approval for changing their tax year, streamlining what could otherwise be a more complex process. The form is not a universal tool for all entities but is specifically designed for certain taxpayers, including corporations, partnerships, and personal service corporations, under particular circumstances.

Eligibility for Using Form 1128

To qualify for an automatic approval of a tax year change using Form 1128, a corporation must satisfy several conditions. A primary rule is that the corporation cannot have changed its annual accounting period at any time within the most recent 48-month period ending with the last month of the requested tax year. This regulation prevents frequent, potentially disruptive changes to a company’s tax reporting schedule.

Certain types of corporations are ineligible for the automatic approval process because their tax situations require more detailed review. These include Personal Service Corporations (PSCs), S corporations, controlled foreign corporations (CFCs), and most tax-exempt organizations. Additionally, a corporation that has an interest in a pass-through entity, such as a partnership, or is a beneficiary of a trust or estate does not qualify for the automatic procedure.

A corporation’s financial status during the short period created by the accounting change is also a factor. If the corporation has a net operating loss (NOL) for this short period, it is ineligible for automatic approval. The NOL for the short period may not be carried back; it must be carried forward. This requirement ensures that the change in accounting period is not used primarily to generate immediate tax refunds from prior years’ profits. Finally, the corporation must close its books on the last day of the short period and must file a tax return for this period.

Information Required to Complete Form 1128

You can find the latest version of the form and its instructions at IRS.gov/Form1128. Part I of the form, titled “General Information,” requires foundational details about the entity. This includes the corporation’s legal name, Employer Identification Number (EIN), and complete address. You must also clearly state the beginning and ending dates of both your present tax year and the requested tax year.

Part II, “Automatic Approval Request,” contains a series of yes-or-no questions that function as a checklist for the eligibility requirements. These questions directly correspond to the conditions for automatic approval, such as whether the corporation has changed its accounting period within the last 48 months or if it is a type of entity that is ineligible. Answering these questions accurately is necessary for determining if the corporation can use the streamlined automatic approval process.

A calculation of the short period income is a component of the filing. The corporation must compute its taxable income for the short tax year resulting from the change. This figure must then be annualized by multiplying the short-period taxable income by 12 and then dividing the result by the number of months in the short period. This annualized income figure is used to calculate the tax for the short period, ensuring the tax liability is proportional to that of a full year.

Filing Procedures and Post-Filing Expectations

The form must be filed by the due date of the federal income tax return for the short period, including extensions. Where you file depends on the type of request. For automatic approval requests, the form is filed with the IRS service center where the corporation files its income tax return. For requests that require an IRS ruling, the application must be sent to the IRS National Office.

A unique aspect of the automatic approval process for Form 1128 is the lack of direct communication from the IRS after submission. If the corporation meets all the specified conditions and files the form correctly and on time, the approval is considered automatic.

The corporation must attach a copy of the filed Form 1128 to its federal income tax return for the short period. This serves as the official record of the accounting period change within the tax filing itself. Failure to attach the form to the short-period return can invalidate the change, creating potential compliance issues.