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Description
JIM currently uses the calendar year as its financial and tax annual accounting period. Management, because of the seasonality of sales, wants to change to a fiscal year beginning April 1st through March 31st. You have been asked to review the tax law criteria for making this change.
Write a memo to your CFO:
indicating the outcome of such a change on current taxes, and
outlining the requirements for making this change.
Explanation & Answer:
1500 Words
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Explanation & Answer
Attached.
Running Head: MEMO ACCOUNTING
1
Memo Accounting
Name
Institutional Affiliation
MEMO ACCOUNTING
2
DATE: February 13, 2020.
TO: Tax Manager
FROM: Jim
SUBJECT: Change of Current Taxation
I am writing to inform you that, I have been using the calendar year as the financial and
tax annual accounting period. My management wants to change the fiscal year from the
beginning of April 1st through March 31st due to the seasonality of sales. This changes will have
a significant impact on my tax returns, and also contribute to changes in the financial statements
at the end of the tax year. The business has been dealing on a seasonal nature basis. This is due to
the fact that it makes its profitability during the summer time while during the winter and fall
time the business is always insolvent. For this reason, for accounting convenience the
management has felt that it is important to change the dates for filing its taxation. In addition,
this required change will also transform the legal operations and structure of the business in the
subsequent tax year. For this reason, there is a need for obtaining a permission from the IRS and
also providing a submission of Form 112B that would require time to implement. For this reason,
there is a need to file an application to adopt change or even retain a tax year.
Impact of the change on current taxes
The first impact on the current rate of taxation is that they are going to increase
proportionally. This is due to the fact that for the business to be eligible to change it fiscal year it
has first to submit the income tax return that has observed that fiscal year at the time. This is due
to the fact that the blended effective tax rates as per requirements of the tax code usually requires
companies to calculate the blended rates based on the ratio of days in the fiscal year before and
MEMO ACCOUNTING
3
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