Form 1128

[NotEasy]

Today, I received the most strange request that I have ever came across in my career as a tax practitioner.

A taxpayer is moving out of the country in April 2011 for a new job. Now she wants to add the fist 3 months of her 2011 income to the 2010 income tax return. And therefore next year she will only need to report her income in the foreign country (less complications...according to her). In other words, what she wants is that her 2010 income tax return will include her income from 1-1-2010 to 3-31-2011. Even though I told her it is not allowed, she argued she has done a lot of research and already found out that it can be done by filing the Form 1128. Now I am second guessing myself. Is she right or not?

[Uncle Sam]

Form 1128

Form 1128
Application To Adopt, Change, or Retain a Tax Year

WIthout reading any instructions - I doubt the "Change" could mean extending a tax year beyond 12 months.

[NotEasy]

Form 1128
Application To Adopt, Change, or Retain a Tax Year

WIthout reading any instructions - I doubt the "Change" could mean extending a tax year beyond 12 months.

Thank you.

Has anyone used Form 1128 before and know a lot about what it can do and cannot do?

[Burke]

Never done one, but the Form and 8 pages of instructions are on the IRS website under Forms and Publications.

[ToledoEd]

I have never done this, but she may be able to use the form to creat a short tax year of January 1 thru March 31, and then she would have a new tax year of April 1, 2011 thru March 31, 2012.

[taxmandan]

I'm not sure why she thinks her foreign income is not reportable after she moves. Is she an American citizen or holder of a 'green card?' If so, she will report and pay US tax on her worldwide income for future years, (sans the foreign income exclusion if eligible though still required to file a return). As for the 1128, I don't think it extends the tax year to 15 months but might be used to create a short year as someone else mentioned.

[Burke]

See Rev Proc 2003-62 on this matter. From my reading, it appears this is only used to change from a fiscal year TO a calendar year. In all my years of experience, an individual has always been required to use a calendar year. Some other entities can use fiscal years, and they can apparently use this form to change to a calendar year. I never heard of an individual taxpayer that could change their accounting period to a fiscal year. If she wants to try it, I guess she can fill out the form and send it to the IRS. But it certainly cannot be for longer than a 12-mo period. So, no, she cannot add 3 months to her 2010 tax return year. And she is supposed to continue to file a US tax return as long as she is a US citizen.