Home: Message List - Tax year schedule

Re: Tax year schedule

LUCKIEST — Tue, 18 Dec 2007 18:01:11 GMT

h1.One of the biggest mistakes people make when setting up a new corporation is
using a calendar year instead of a different fiscal year. They think it's
easier to do all of their bookkeeping with the same tax year as they use for
their personal taxes. It's also easier to coordinate with 1099s and other
information documents that are received, which are almost always prepared on a
calendar year basis.

There are big tax savings opportunities by shifting income back & forth

between the 1120 with its tax year and the 1040 with its calendar year.
This can mean shifting income back and forth so that it is never subject to
income tax. More frequently, it means shifting income between years in
order to smooth out the effective tax rate and avoid going above the 15%
bracket.

Re: Tax year schedule

SCORE17 — Thu, 09 Aug 2007 17:29:47 GMT

No problem, it is a good question, I don't think there is anything magical about putting Dec and Jan together, it all depends on the business and what is the best fit. Often in retail December will be the strongest month with holiday sales and January one of the weakest, so it helps to even out the quarters.

Re: Tax year schedule

ScubaDive — Thu, 09 Aug 2007 15:50:29 GMT

Thanks SCORE17. That's really helpful. Why is it better to lump Dec, Jan, and Feb in the same quarter as opposed to Jan., Feb, Mar?

That makes a lot of sense about not having to deal with accounting during the busy sales season. It's a lot easier to balance the books after the storm.

Re: Tax year schedule

SCORE17 — Wed, 08 Aug 2007 15:45:44 GMT

Often the operating cycle does not coincide with the calendar year due to seaonsality of sales. For example, in retail, by setting the fiscal year to end at the end of February, December sales and Jan returns get lumped into the same quarter, and it also allows the accounting group to close the year out during a slower period.

Tax year schedule

ScubaDive — Sun, 22 Jul 2007 23:36:15 GMT

I am in the process of incorporating my business, and there is an option of selecting the tax year. This was never an option with Schedule C businesses, but with corporations it is. Is there a reason why one would change the tax year away from the standard fiscal year? Any help is much appreciated.