Choice or change of taxable year still offers opportunities for tax savings

Article Abstract:

The Tax Reform Act of 1986 and Temporary Regulations recently issued by the IRS will restrict the ability of taxpayers to change or select new tax years. There are no additional restrictions on Subchapter C corporations, except for personal service corporations, which must use the calendar year unless a business purpose for adopting another year can be established. Subchapter S corporations must either use the calendar year, or satisfy the IRS that the selection of a fiscal year is required by business purposes. Partnerships must adopt the taxable year of the majority interest holder(s). All noncharitable trusts must adopt the calendar year for all tax years beginning after 1986. Corporations can change their taxable years without IRS approval only if: the corporation has not changed its accounting period over the last ten years; the short year resulting from the change does not show a net operating loss; the income resulting from the short year is 80 percent or more of the corporation's taxable income for the year before the short year; any special status is maintained; and the corporation does not elect to become a Subchapter S corporation in the year following the short year.

Methods, Tax planning

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Successful settlement or compromise can save taxpayers time and money

Article Abstract:

Taxpayers who lack the ability to pay tax deficiencies have several options available to them. The liability for the alleged deficiency must first be verified and the ability to pay evaluated. If taxpayers do not currently have funds to pay for tax deficiencies then installment payment plans can often be negotiated. Offers to compromise are excellent alternatives for taxpayers who cannot pay their tax liabilities in the present or in the future. Taxpayers who have not been able to come to an agreement with the IRS or who have some other complaint may be able to find assistance with the IRS's Problem Resolution Office.

Tax penalties

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