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Newsletter
Choosing A Fiscal Year
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.
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.
Tips & Tactics
If you already have a December 31 tax year and
have already filed an 1120 using that year, IRS
will not allow you to switch to a different fiscal
year because they do not want to assist you in
saving on your taxes. It is often more efficient to
start a brand new "virgin" corporation that can
use a better fiscal year.
If you haven't yet filed the first 1120 for the
corporation, you can still change the year to any
month end you want. This is possible even if
you told IRS that you were planning to end the
tax year in December, which many people
accidentally do when they submit their SS-4 to
apply for the new ID number. However, once
the first 1120 has been filed with IRS, the fiscal
year is set in stone.
This is not an option for S corporations. They
must use a calendar tax year.
While any month other than December is a
good idea, I have found that using calendar
quarters, such as March 31, June 30 or
September 30, is handy for reconciling the
corporate numbers with payroll and sales tax
returns, which are often prepared on a quarterly
basis.
When properly utilizing a corporation to
minimize taxes, it's important to smooth out and
shift income between the 1120 and the owners'
1040. With a corporate year-end that is close to
the personal year-end, such as February 28 or
November 30, that doesn't allow much time to
accomplish the smoothing process. For that
reason, I have found that a June 30 corporate
year-end is the ideal one. That gives us six
months on either side to make any necessary
changes.
If you already have a December 31 tax year and
have already filed an 1120 using that year, IRS
will not allow you to switch to a different fiscal
year because they do not want to assist you in
saving on your taxes. It is often more efficient to
start a brand new "virgin" corporation that can
use a better fiscal year.
If you haven't yet filed the first 1120 for the
corporation, you can still change the year to any
month end you want. This is possible even if
you told IRS that you were planning to end the
tax year in December, which many people
accidentally do when they submit their SS-4 to
apply for the new ID number. However, once
the first 1120 has been filed with IRS, the fiscal
year is set in stone.
This is not an option for S corporations. They
must use a calendar tax year.
While any month other than December is a
good idea, I have found that using calendar
quarters, such as March 31, June 30 or
September 30, is handy for reconciling the
corporate numbers with payroll and sales tax
returns, which are often prepared on a quarterly
basis.
When properly utilizing a corporation to
minimize taxes, it's important to smooth out and
shift income between the 1120 and the owners'
1040. With a corporate year-end that is close to
the personal year-end, such as February 28 or
November 30, that doesn't allow much time to
accomplish the smoothing process. For that
reason, I have found that a June 30 corporate
year-end is the ideal one. That gives us six
months on either side to make any necessary
changes.
4th Quarter 2007
| Giblet Gravy |
Giblets from turkey (liver, heart, gizzard, and
neck), cooked
4 cups turkey stock or broth or chicken broth
or stock
2 chicken bouillon cubes
2 teaspoons poultry seasoning
2 heaping tablespoons reserved uncooked
cornbread stuffing mix
3 tablespoons cornstarch
1/3 cup cold water
Salt and freshly ground pepper
1 hard boiled egg, sliced
Cornbread Stuffing, recipe follows
neck), cooked
4 cups turkey stock or broth or chicken broth
or stock
2 chicken bouillon cubes
2 teaspoons poultry seasoning
2 heaping tablespoons reserved uncooked
cornbread stuffing mix
3 tablespoons cornstarch
1/3 cup cold water
Salt and freshly ground pepper
1 hard boiled egg, sliced
Cornbread Stuffing, recipe follows
| Cranberry Fruit Relish |
INGREDIENTS:
16 ounces fresh cranberries
1 navel orange
1 firm pear
1/2 cup chopped dates
1 to 1 1/2 cups sugar
PREPARATION:
Zest orange; reserve zest and remove
remaining peel. Grind or process cranberries
with quartered orange and peeled and
quartered pear and the dates. Add zest to the
mixture and sweeten with 1 to 1 1/2 cups of
sugar to taste.
Makes about 4 cups of cranberry relish.
16 ounces fresh cranberries
1 navel orange
1 firm pear
1/2 cup chopped dates
1 to 1 1/2 cups sugar
PREPARATION:
Zest orange; reserve zest and remove
remaining peel. Grind or process cranberries
with quartered orange and peeled and
quartered pear and the dates. Add zest to the
mixture and sweeten with 1 to 1 1/2 cups of
sugar to taste.
Makes about 4 cups of cranberry relish.
