FISCAL YEAR QUESTION

Q. I have a question if you can help me. I have a new LLC created on earlier this year. I applied IRS online for EIN. Calendar year is a default on this so I have to elect Fiscal year now with form 1128. My question is can I elect 6/30 year end although even though my business started in May of 2011? ~ Thanks

A. First of all, you really shouldn’t be setting up new business entities without the assistance of a qualified adviser. It is too easy to make mistakes that may be impossible to remedy .

There are a couple of rookie mistakes that an experienced tax pro would have alerted you to.

First, if you are choosing to have your LLC taxed as a C corp., you can choose the end of any month to be its fiscal year-end, regardless of when it was chartered.

For example, if you want June 30 to be the fiscal year-end, that’s your right to choose. You would need to file the initial 1120 covering all of the activity for the period from your startup in May through 6/30/11. This 1120 or an extension (Form 7004), would have been due 9/15/11. You need to file that 1120 even if no actual activity took place or IRS will assume that you made millions of dollars.

When you have a brand new C corp., it has no set fiscal year-end, so the initial 1120 becomes the official notification to the IRS of that fact. This is even if you used December 31 on the SS-4.

Secondly, you do not need to file Form 1128 to designate the tax year for a new corp. that has not filed any 1120s.