9042 / Can an accounting period be changed once chosen?

Yes. A taxpayer can change its accounting period if it has obtained the approval of the IRS unless the taxpayer is authorized under the Internal Revenue Code or the regulations to change the accounting period without prior approval.¹ (See Q 9043.)

Individual taxpayers are entitled to change accounting periods (e.g., from a calendar year to a fiscal year) by filing Form 1128 with the IRS.² Pass-through entities, such as partnerships and S corporations, are not entitled to change accounting periods using this form.

Partnerships and S corporations can obtain automatic approval to change to an alternate accounting period if the requirements set forth in Revenue Procedure 2006-46 are satisfied, meaning that the entity:³

(1)  Is changing to a required taxable year ( Q 9037 and Q 9038) or to a 52 to 53 week accounting period ending in reference to its required taxable year ( Q 9036);

(2)  Satisfies the 25 percent gross receipts test ( Q 9040);⁴

(3)  Is an S corporation (or is planning to make an S election) changing to its ownership tax year ( Q 9040);

(4)  Wishes to change from a 52 to 53-week taxable year to a non-52 to 53-week taxable year that ends on the last day of the same calendar month that is an otherwise permitted taxable year, and vice versa.⁵

Typically, the IRS will establish conditions that the taxpayer must satisfy in order to change its accounting period when it consents to the change.⁶ In addition to any terms established by the IRS, the taxpayer will be required to maintain its records and compute its income based on the requested accounting period.

Generally the taxpayer must use Form 1128, “Application to Adopt, Change or Retain a Tax Year” to file for a change of accounting period. The taxpayer may not request to retroactively change an accounting period even to change to a required accounting period for a prior tax year.⁷