Fiscal Year End - What Year Return Do I Use for S-Corp Filing?

Thanks for the clear explanation! So just to confirm, even though half of our fiscal year was actually in 2021 (July-December), we still file as a 2022 return because the ending date is in 2022? Also, does this same rule apply for all the Schedule K-1 forms we need to issue to our shareholders?

Yes, that's exactly right. The year the fiscal period ends in determines which tax year you file under. It doesn't matter that half the fiscal period was in 2021 - since it ended in 2022, it's a 2022 return. This same rule applies to the Schedule K-1 forms you issue to shareholders. All K-1s for this fiscal period should be marked as 2022 forms, and shareholders will report this income on their 2022 personal tax returns (assuming they're calendar year taxpayers).

Did you find it worked well for other S-Corp issues too? We have some complicated income allocation situations and I'm wondering if something like this could help sort those out too.

How accurate was it really? I've tried other AI tax tools that gave me completely wrong information. Does it actually understand the special rules for fiscal year S-Corps or is it just giving generic advice anyone could find online?

For the S-Corp income allocation issues, absolutely! It was particularly helpful with our uneven shareholder distributions and making sure we properly documented basis calculations. The system caught a previous error where we hadn't properly tracked shareholder loan repayments. Regarding accuracy, I was initially skeptical too. What convinced me was that it correctly identified an obscure rule about fiscal year businesses that aligned with a tax issue specific to our industry. It's definitely not just repackaging generic advice - it highlighted specific sections of the tax code relevant to our situation and explained how they applied to our fiscal year.

Wait, how does this actually work? Does it just call the IRS for you? I'm confused how a third-party service can get you through to IRS faster than calling yourself.

This sounds completely fake. There's no way any service can magically get you through the IRS phone tree. They just want your money and will probably just put you on hold themselves then transfer you after taking a fee. The IRS doesn't give priority to third party services.

It doesn't call the IRS for you - it navigates through all the phone menus and holds your place in line. You get a notification when an actual human IRS agent is about to come on the line, then you take over the call. I was confused too until I saw how it worked. Regarding the skepticism, I totally get it. I thought the same thing initially. What convinced me is that they don't actually handle any part of your actual conversation with the IRS - they just handle the waiting and menu navigation. When the agent comes on the line, you're the one who talks to them directly. The IRS has no idea you used a service to navigate their phone system.

Is there a "business purpose" test for fiscal years? Our accountant mentioned something about needing to prove a business reason for having a fiscal year different from the calendar year, but I'm not sure if that's still a requirement.

Yes, there absolutely is a business purpose test. When requesting a fiscal year that's different from your shareholders' tax years, you need to establish a legitimate business purpose on Form 1128. Common valid business purposes include seasonal business cycles (like retail with a January 31 year-end after holiday season), matching your industry's natural business year, or aligning with regulatory requirements. The IRS scrutinizes these requests fairly carefully, so you need actual business justification, not just tax planning reasons.

You're definitely using the correct approach! I made the mistake of using 2021 software for our March 2022 fiscal year end filing, and it caused all kinds of problems. The software was missing updated forms and couldn't e-file properly. Always use the tax software from the year your fiscal year ends in, even if most of your business year was in the previous calendar year.

Thanks! That's really reassuring to hear. Our accountant explained it but I still get nervous every time we file. The software thing was confusing at first because you're buying "2022 software" to file a return in 2022, but the IRS considers it a 2022 return anyway, so it all matches up.

This is really helpful advice! As someone who just started handling our family S-Corp taxes this year, the estimated payment schedule was definitely something I overlooked initially. I was so focused on figuring out the annual return filing that I completely missed the quarterly obligations. Quick question - do the estimated payments need to be based on the previous fiscal year's tax liability, or should they reflect the current year's expected income? Our business has grown significantly this year and I'm worried about underpayment penalties if I base estimates on last year's much lower numbers. Also, completely agree on getting professional help! Even with all the great advice in this thread, there are so many nuances that it's worth having an expert review everything at least initially.