Tax Year

[Koss]

An earlier post described the case of an older couple, in which both spouses died in the same year. The question was about filing status; the answer was MFS or MFJ. No other choices are available.

But perhaps one of the two taxpayers could use Form 3115 to change their tax year. That might make it possible for one of them to use the single filing status, because they would be single for the year following the death of the spouse.

Yes, I'm kidding.

I've always wanted to do a tax return for an individual with a tax year other than a calendar year. I don't think I ever will.

But it would sure be a hoot.

Suppose an individual had a fiscal year ending on June 30.

Gives a whole new meaning to the request to prepare the tax return based on the final pay stub...

[LMAO]

Burton M. Koss
koss@usakoss.net

[Golden Rocket]

Pineapples

Burton, a pineapple farmer might qualify. I've heard a taxpayer with no other income than pineapple farming has to file bi-annually, but don't know whether this is true.

It is true, however, that the maturation cycle of a pineapple is two years. Maybe Bjorn or a couple of our Hawaiian board members can comment on this...

[Koss]

Fiscal Year

At least in principle, any individual could qualify to use a tax year that is not a calendar year. At tax year has to be twelve months, but it can start any time you want it to.

Well, almost any time. I know that certain types of entities are required to use a calendar year. And I know that entities have a "short tax year" based on when they begin doing business or cease doing business.

The problem with an individual is that an individual chooses his tax year when he files his first return, and then it can't be changed without applying for the change on Form 3115. So presumably almost every individual chose a calendar year by default, when they filed their first return as a teenager.

Last year, I had the privilege of preparing my stepdaughter's first tax return. She was 17.

No, I did not make an election on her first return to have a tax year other than a calendar year.

It would have been a lot of fun, but it also would have been about as bad as naming your kid Moon Unit. Talk about stunts that some parents pull without looking at the baggage that their kid will be carrying down the road... Reminds me of a sports nut that got his five minutes of fame a few years back, when he named his newborn baby Espn. (He pronounces it "Espen.")

The regs for changing your tax year, whether you are an individual or an entity, are a bit complicated, but entities do it all the time. I'm just not sure an individual has ever tried it. It may not come within the changes on Form 3115 that are "automatic," and if it doesn't, then you have to pay a user fee, and... well, it's a rabbit hole.

One of the criteria is that you have to demonstrate a legitimate business purpose for the alternate fiscal year.

A fiscal year ending June 30 would make perfect sense for a sole proprietor in the business of... preparing tax returns. [LMAO]

Problem is, if he also has a "day job" at which he is an employee, it would simply wreak havoc. The guy literally would have to prepare his tax return using the final pay stub for his fiscal year, i.e., his pay stub for the period ending June 30.

But as I said earlier, it would be a hoot. There's a little known provision that makes it possible for an employer to issue a Form W-2 at any time during the year. I think it is intended for certain situations where an employee quits, gets fired, or dies. I don't think I've ever seen it done.

If you want to see a very good live demonstration of the look that is referred to as deer in the headlights...

Accompany your client on a face-to-face visit to his employer's payroll or HR office...

And watch while your client explains that he has changed his tax year to a fiscal year, and therefore needs Form W-2 issued by July 31, 2009, to reflect wages earned from July 1, 2008 through June 30, 2009.

Jeez, if a teenager actually elected a fiscal year on her first return...

What happens five or ten years later when she gets married?

Talk about making the right choices early in life...

Maybe that would be the new pickup line... "So when does your fiscal year end?"

LMAO. Sorry guys, I've been doing this stuff for too many years. If I didn't have this really warped sense of humor about this business, I would go stark raving mad.

For the record, this is not pure fantasy. It could be done. Look at the line right above the name field on Form 1040. It allows the taxpayer to identify an alternate tax year.

BMK

[Golden Rocket]

Pickup Lines

Maybe that will be the new pickup line... "So when does your fiscal year end?"
BMK

Not bad Burton. This goes down in bar-hopping lore with such yuppie-in-the-sky remarks as "What is your best day of the month for biorhythms?" The less sophisticates said things like "I'm a Taurus, what's your sign?" Us rednecks were more direct "Let me buy you a drink just for starters."

With these ancient and worn-out pickup lines, you can tell how long it's been since I've been out there. But you never can tell when Callie will kick me out and I may have to swagger up to some chick young enough to be my daughter and say, "Oh by the way, I do taxes -- when does your fiscal year end?"

[Koss]

Tax Pros

For a sole proprietor who does income taxes for a living, it actually makes sense. But it's still hilarious...

"My fiscal year as an individual ends on June 30, since most of my business activity takes place between January and May. That's because every individual in this country except me has a fiscal year that ends on December 31."

BMK

[joanmcq]

Maybe its a tax urban legend, but I heard there was a guy that elected a fiscal year. The June 30 year would be perfect if you moved to Australia, where everyone has a July to June 30 tax year. I think Great Britain has some wierd year too.

However, I've never seen where Moon & Dweezil ever complained about their names. Maybe being brought up the the Zappa household (and in LA) made it ok.

[farm girl]

I hope I don't regret telling you this ...

... but my husband and I file on a fiscal year - May to April. So do his brothers, parents and at least one of his uncles that I know. I won't say that this is common since I don't know any others that do, but it seems pretty normal to us. Well, I guess normal is a relative term - no pun intended.

As for:

And watch while your client explains that he has changed his tax year to a fiscal year, and therefore needs Form W-2 issued by July 31, 2009, to reflect wages earned from July 1, 2008 through June 30, 2009.

W2's and 1099's are based on the calendar year

And I should mention that I do the payroll for the farm and work at HRB

Accompany your client on a face-to-face visit to his employer's payroll or HR office...

so if you ever have a problem, feel free to stop by!

[outwest]

Well Burton, honest to gosh...

I actually have done a fiscal year individual. Firm I worked for had an old farmer that had a February 28 year end. Really wild return, his deceased wife had a bypass trust that was calendar year, his was fiscal and I worked off of his 16 column ledgers by month.

Get's better, after his wife passed away, he married her sister. Happily married at 90 +

[erchess]

My story

I began to file tax returns the year I turned sixteen. The first one is a story I won't repeat because I have told it here but it ended with a suggestion from the IRS that I get my Dad to help me in the future. I let him just do them through my college years but I think that I took over doing them at some point during my graduate school years. I do not know what source it was, but I consulted a printed source of some kind about changing to a Fiscal Year. My interest was due to the fact that the filing deadline came about the time most of my major term papers for the semester were due and this was followed immediately by the crunch of final exams. What I learned dissuaded me from attempting a change. 1. If I understood correctly, what I read told me that a Fiscal Year had to be elected prior to the due date or filing of your first return. 2. Even if I made the election it seemed that I would then be at least potentially stuck with it even though my circumstances might make yet another filing deadline more fun.