Late Form 1128 treated as timely after accountant error

Plain-English summary

A taxpayer relied on an accountant to file Form 1128 to change its tax year from June 30 to December 31, but the form was not filed by the deadline for the required short-period return. After discovering the error, the taxpayer requested regulatory relief. The IRS found that the taxpayer acted reasonably and in good faith and that relief would not prejudice the government, so it treated the late Form 1128 as timely filed. The ruling did not decide whether the taxpayer was otherwise eligible to change its tax year or qualify under Revenue Procedure 2006-45, issues left to the appropriate Service Center.

Ruling snapshot

• Question: Could the taxpayer's late Form 1128 requesting a calendar tax year be treated as timely?
• Outcome: Yes, but the ruling did not approve the requested accounting-period change itself.
• Key authorities: IRC § 442; Treas. Reg. §§ 1.442-1 and 301.9100-1 through 301.9100-3; Rev. Proc. 2006-45.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201924004 Third Party Communication: None
Release Date: 6/14/2019 Date of Communication: Not Applicable
Index Number: 9100.00-00, 442.00-00
Person To Contact:
------------------------ -----------------------, ID No. -------------
------------------------------------ Telephone Number:
------------------------------------------- ----------------------
------------------- Refer Reply To:
-------------------------------- CC:IT:B05
-------------------------------- PLR-134214-18
Date: March 14, 2019

Legend

Taxpayer = ------------------------------------------------------------------------------------------------

                  ------------------------

Accountant: = ---------------------------------

Year = -------

City = ----------

State = -------

Dear -------------------:

This ruling is in reference to Taxpayer’s request that a Form 1128, “Application To Adapt,
Change, or Retain a Tax Year”, be considered timely filed under the authority in
§§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations.
Taxpayer filed a late Form 1128 to change its accounting period, for federal income tax
purposes, from a taxable year ending June 30 to one ending December 31, effective
December 31, Year.

Section 1.442-1(a) of the Income Tax Regulations provides, in part, that a taxpayer
seeking to change its annual accounting period and use a new taxable year must obtain
the permission of the Commissioner. Section 1.442-1(b)(1) states that in order to secure
the Commissioner’s consent to change an annual accounting period a taxpayer must file
a Form 1128 with the Commissioner within such time and in the manner provided in
published administrative procedures.

PLR-134214-18 2

Rev. Proc. 2006-45, 2006-2 C.B. 851 provides procedures for certain corporations to
obtain automatic approval to change their annual accounting period under § 442 of the
Internal Revenue Code. A corporation complying with all the applicable provisions of this
revenue procedure will be deemed to have obtained the approval of the Commissioner to
change its annual accounting period. Section 7.01(2) of Rev. Proc. 2006-45 provides
that a Form 1128 filed pursuant to the revenue procedure will be considered timely filed
for purposes of § 1.442-1(b)(1) of the Income Tax Regulations only if it is filed on or
before the time (including extensions) for filing the return for the short period required to
effect such change.

Taxpayer represents that it relied on Accountant for advice on appropriate actions and for
timely filing of the necessary documents with the Internal Revenue Service. The
information furnished indicates that Taxpayer did not file its Form 1128 by the due date of
the return for the short period required to effect such change. However, after learning of
the error, Taxpayer filed its Form 1128 under § 301.9100-3.

Section 301.9100-3(a) provides that requests for extensions of time for regulatory
elections that do not meet the requirements of § 301.9100-2 (automatic extensions), such
as the instant case, must be made under the rules of § 301.9100-3. A request for relief
subject to § 301.9100-3 will be granted when the taxpayer provides evidence to establish
the taxpayer acted reasonably and in good faith, and that the granting of relief will not
prejudice the interests of the government.

Based on the facts and information submitted and the representations made by
Taxpayer, we conclude that Taxpayer has acted reasonably and in good faith, and that
the granting of relief will not prejudice the interest of the government. Accordingly,
Taxpayer has satisfied the requirements of the regulations for granting of relief, and
Taxpayer’s late filed Form 1128 requesting to change to a taxable year ending December
31, effective December 31, Year, is considered timely filed.

Because a change in period under Rev. Proc. 2006-45 is under the jurisdiction of the
Director, Internal Revenue Service Center, where the Taxpayer’s returns are filed, we
have forwarded the application to the Director, City, State Service Center. Any further
communication regarding this matter should be directed to the Service Center.

This ruling is based on the facts and representations submitted by Taxpayer and
accompanied by a penalty of perjury statement executed by an appropriate party. This
office has not verified any of the material submitted in support of the request for a ruling.
However, as part of examination processes, the IRS may verify the factual information,
representations, and other data submitted.

This ruling addresses the granting of § 301.9100-3 relief only. We express no opinion
regarding the tax treatment of the instant transaction under the provisions of any other
section of the Code, regulations, or regarding the tax treatment of any conditions existing

PLR-134214-18 3

at the time of, or effects resulting from, the instant transaction. Specifically, we express
no opinion as to whether Taxpayer is permitted under the Code and applicable
regulations to change to the tax year requested in the Form 1128, or whether the change
may be effected under Rev. Proc. 2006-45.

A copy of this letter must be attached to any income tax return to which it is relevant.
Alternatively, taxpayers filing their returns electronically may satisfy this requirement by
attaching a statement to their return that provides the date and control number of the
letter ruling.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent. In accordance with the Power of
Attorney on file with this office, a copy of this letter is being sent to your authorized
representative.

                                    Sincerely,


                                    Shareen S. Pflanz
                                    Senior Technician Reviewer, Branch 5
                                    Office of Associate Chief Counsel
                                    (Income Tax & Accounting)