When creating a business, the owners must decide on what taxable year to give the business. What...

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Accounting

When creating a business, the owners must decide on what taxableyear to give the business.
What choices of taxable years are available for "C"corporations, "S" corporations and partnerships?
What impact does the choice of taxable year have on the taxationof the owners?

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Taxable Year of a business Tax year affects your taxable income All the income received or accrued within a single year is reported on that years tax return along with all the expenses paid or accrued and the end of the year is the cutoff point for many taxsaving strategies How to account for your income and expenses is one of the first decisions you must make when you start your business A tax year is the designation of a year used by the IRS for tax purposes The IRS says A tax year is an annual accounting period for keeping records and reporting income and expenses For tax year purposes the IRS says you can use either of these two years as your business tax year A calendar year January 1 to December 31 Your companys fiscal year If your fiscal year ends on December 31 youre using a calendar year as your business tax year Your business fiscal year is almost always your tax year but it doesnt have to be A corporation with a March 31 fiscal year end may also file a corporate income tax return effective March 31 C corporations A separate legal entity created by a state filing The Ccorporations also called the regular corporation is subject to corporate income tax Income earned by a C corporation is normally taxed at the corporate level using the corporate income tax rates Businesses that operate as C corporations have substantial flexibility when selecting a tax year Once selected a tax year generally must be maintained until the business is required or elects with IRS permission if necessary to change it There are two types of tax years a Calendar Tax Year A calendar tax year is a period of 12 consecutive months beginning See Answer

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