Posted by Casey A. Hagy, CPA
“I welcome change, as long as nothing is altered or different.” If you’re like me, you may be hesitant about change. However, not all change has to be difficult! If you are a nonprofit organization and have been thinking about changing your accounting period, do not fear – the process is relatively simple.
After management and the Board of Directors have approved the change, the organization would then need to file a short tax period Form 990 or Form 990-EZ (not a Form 990-N). A “short tax period” is an accounting period of less than 12 months. If an organization is not required to file an annual information return, but does file a 990-T, it may change its accounting period by filing a Form 990-T. If an organization is not required to file an annual information return or a Form 990-T, it is not necessary to inform the IRS of the accounting period change.
Example: If an organization was originally a December year-end and decided to change to a June year-end, they would need to file a Form 990 for the short tax period from January 1 – June 30. “Change of Accounting Period” must be written at the top of the Form 990. After the completion of this short tax period Form 990, the change in accounting period would be official with the IRS. The next required Form 990 would be for the period July 1 – June 30 of the following year.
If an organization has already changed its accounting period within the last 10 calendar years, it must file the short tax period Form 990 (even if they usually do not have an annual information return filing requirement) as well as Form 1128 in order to change its accounting period. The instructions for Form 1128 can be found here. The Form 990 and Form 1128 must be filed by the 15th day of the 5th month following the end of the new accounting period. These forms should not be filed until after the end of the short tax period.