We had a reader post the following question to the blog based on our post of yesterday:
“Paul, What individuals are allowed to have a fiscal year-end for individual income tax filing purposes?”
Most farmers automatically assume that an individual has to be on a calendar year-end. The actual requirement for your year-end is based on what year you elect on the very first tax return you ever file. On the top of Form 1040 are the fiscal years that you can elect.
Early in my career I personally dealt with several farmers who had a February 28 year-end.
You may think it would be a good thing to have a fiscal year-end since you could have some deferral by setting up partnerships with a calendar year-end. However, if you are the majority owner of that partnership, you are required to match up that partnership year-end with your year-end (you can make elections to have a different year-end but that involves making an interest free deposit with the IRS).
I continue to deal with a couple of farmers with a fiscal year-end and I can tell you is a royal pain filing the return with the IRS. There is special processing involved and almost every year the IRS seems to not be able to match up the payments made by the farmer.
I would suggest not having a child elect a fiscal year-end. The costs far outweigh any benefit.
