US Tax Compliance: The IRS Form 1128 and what you need to know
The IRS Form 1128, titled “Application to Adopt, Change, or Retain a Tax Year,” is a document used by businesses and individuals to request a change in their accounting period or tax year.
This form is essential for entities that need to alter their tax year for various reasons, including alignment with business cycles, changes in business structure, or other practical considerations.
When filing Form 1128, the applicant must provide a detailed explanation for the requested change, along with any relevant documentation. Approval from the IRS is not automatic, and the agency will consider each application based on its individual merits and the tax laws and regulations that apply.
The ability to change a tax year can be important for tax planning and management, making Form 1128 a key tool for businesses and individuals looking to optimize their tax strategies.
One example of when you would use the Form 1128 is if you want to line up your US tax year to match the April-March Indian tax year, which many India-US cross-border companies elect to do.
This makes it easier to ensure you are leveraging the full benefits of the India-US Tax Treaty. It also ensures your bookkeepers can close out your financial accounts all at once as opposed to having to do them in multiple cycles.
