Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

1040x Return

Tax MilitaryH And R Block 1040x1040 Ez Tax TableDownload 1040ezIrs Free Tax FilingIrs Forms And Publications2010 E FileCan I Efile 1040x1040ez Form Download1040x Tax Return For Prior Year Instructions1040ez Form 2014Filing Back Taxes On Turbotax2011 E File1040 Ez State Tax FormI Need To File My 2011 Federal TaxesEarned Income Tax Credit Calculator2009 1040 Tax Form2011 1040Amend A Tax Return2010 1040ez FormsIrs Free E File 2012File 2012 Taxes Late Online FreeFree Tax Act 2011Filing State Taxes Free1040 Ez 2010 FormAmended Tax Return FormHow To Amend 2012 Taxes2011 Federal Tax Form 1040Amended Federal Income Tax ReturnFree E File Federal And State TaxesFree State Tax Filing 2012Free State Tax EfileTurbotax Free EditionAmending Federal Tax ReturnsE File 1040x1040ez InstructionsH&r Block 1040nrFile 1040 Online2010 Electronic Tax FilingHow Do I File An Amendment To My Tax Return

1040x Return

1040x return Index Symbols $10,000, cash payments over, Introduction A Assistance (see Tax help) C Cash transactions over $10,000, Introduction F Form, Who Must File Form 8300? 8300, Who Must File Form 8300? Free tax services, How To Get Tax Help H Help (see Tax help) M More information (see Tax help) P Publications (see Tax help) R Reporting cash payments over $10,000, Introduction T Tax help, How To Get Tax Help Taxpayer Advocate, Taxpayer Advocate Service. 1040x return TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications
Print - Click this link to Print this page

Understanding Your CP286 Notice

We send this notice when we approve Form 8716, Election To Have a Tax Year Other Than a Required Tax Year.


What you need to do


You may want to


Answers to Common Questions

What should I do if I want to change my tax year for Form 1065 or Form 1120S to a calendar year filing?
File a final Form 8752, which will terminate your section 444 election. If you have a credit on your account, you must file a final Form 8752 for us to refund the payments to you. You must also file a short period business income tax return with your final Form 8752 (Form 1065 or Form 1120S) ending December 31.

Do I need to file Form 8752 when I don’t owe a payment?
Yes. You must file Form 8752 each year the section 444 election is in effect, even if no payment is due.

What if I am no longer required to file a Form 1065 or Form 1120S? Do I need to ask the IRS to terminate my election?
Yes. You must send a final Form 1065 or Form 1120S, along with a final Form 8752.

Are there any consequences if I don’t file Form 8752 or send in my payment when I file?
Failure to file or failure to pay will result in the termination of your fiscal year election.


Understanding your notice

Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP286, Page 1

 

Page Last Reviewed or Updated: 14-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The 1040x Return

1040x return 2. 1040x return   Accounting Periods and Methods Table of Contents Introduction Useful Items - You may want to see: Accounting Periods Accounting MethodsCash Method Accrual Method Combination Method Inventories Uniform Capitalization Rules Special Methods Change in Accounting Method Introduction You must figure your taxable income and file an income tax return for an annual accounting period called a tax year. 1040x return Also, you must consistently use an accounting method that clearly shows your income and expenses for the tax year. 1040x return Useful Items - You may want to see: Publication 538 Accounting Periods and Methods See chapter 12 for information about getting publications and forms. 1040x return Accounting Periods When preparing a statement of income and expenses (generally your income tax return), you must use your books and records for a specific interval of time called an accounting period. 1040x return The annual accounting period for your income tax return is called a tax year. 1040x return You can use one of the following tax years. 1040x return A calendar tax year. 1040x return A fiscal tax year. 1040x return Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. 1040x return A required tax year is a tax year required under the Internal Revenue Code or the Income Tax Regulations. 1040x return Calendar tax year. 1040x return   A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. 1040x return   You must adopt the calendar tax year if any of the following apply. 1040x return You do not keep books. 1040x return You have no annual accounting period. 1040x return Your present tax year does not qualify as a fiscal year. 1040x return Your use of the calendar tax year is required under the Internal Revenue Code or the Income Tax Regulations. 1040x return   If you filed your first income tax return using the calendar tax year and you later begin business as a sole proprietor, you must continue to use the calendar tax year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. 1040x return For more information, see Change in tax year, later. 1040x return   If you adopt the calendar tax year, you must maintain your books and records and report your income and expenses for the period from January 1 through December 31 of each year. 1040x return Fiscal tax year. 1040x return   A fiscal tax year is 12 consecutive months ending on the last day of any month except December. 1040x return A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. 1040x return   If you adopt a fiscal tax year, you must maintain your books and records and report your income and expenses using the same tax year. 1040x return   For more information on a fiscal tax year, including a 52-53-week tax year, see Publication 538. 1040x return Change in tax year. 1040x return   Generally, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year, to request IRS approval to change your tax year. 1040x return See the Instructions for Form 1128 for exceptions. 1040x return If you qualify for an automatic approval request, a user fee is not required. 1040x return If you do not qualify for automatic approval, a ruling must be requested. 1040x return See the instructions for Form 1128 for information about user fees if you are requesting a ruling. 1040x return Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. 1040x return Your accounting method includes not only the overall method of accounting you use, but also the accounting treatment you use for any material item. 1040x return You choose an accounting method for your business when you file your first income tax return that includes a Schedule C for the business. 1040x return After that, if you want to change your accounting method, you must generally get IRS approval. 1040x return See Change in Accounting Method, later. 1040x return Kinds of methods. 1040x return   Generally, you can use any of the following accounting methods. 1040x return Cash method. 1040x return An accrual method. 1040x return Special methods of accounting for certain items of income and expenses. 1040x return Combination method using elements of two or more of the above. 1040x return You must use the same accounting method to figure your taxable income and to keep your books. 1040x return Also, you must use an accounting method that clearly shows your income. 1040x return Business and personal items. 1040x return   You can account for business and personal items under different accounting methods. 1040x return For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. 1040x return Two or more businesses. 1040x return   If you have two or more separate and distinct businesses, you can use a different accounting method for each if the method clearly reflects the income of each business. 1040x return They are separate and distinct only if you maintain complete and separate books and records for each business. 1040x return Cash Method Most individuals and many sole proprietors with no inventory use the cash method because they find it easier to keep cash method records. 1040x return However, if an inventory is necessary to account for your income, you must generally use an accrual method of accounting for sales and purchases. 1040x return For more information, see Inventories, later. 1040x return Income Under the cash method, include in your gross income all items of income you actually or constructively receive during your tax year. 1040x return If you receive property or services, you must include their fair market value in income. 1040x return Example. 1040x return On December 30, 2012, Mrs. 1040x return Sycamore sent you a check for interior decorating services you provided to her. 1040x return You received the check on January 2, 2013. 1040x return You must include the amount of the check in income for 2013. 1040x return Constructive receipt. 1040x return   You have constructive receipt of income when an amount is credited to your account or made available to you without restriction. 1040x return You do not need to have possession of it. 1040x return If you authorize someone to be your agent and receive income for you, you are treated as having received it when your agent received it. 1040x return Example. 1040x return Interest is credited to your bank account in December 2013. 1040x return You do not withdraw it or enter it into your passbook until 2014. 1040x return You must include it in your gross income for 2013. 1040x return Delaying receipt of income. 1040x return   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. 1040x return You must report the income in the year the property is received or made available to you without restriction. 1040x return Example. 1040x return Frances Jones, a service contractor, was entitled to receive a $10,000 payment on a contract in December 2013. 1040x return She was told in December that her payment was available. 1040x return At her request, she was not paid until January 2014. 1040x return She must include this payment in her 2013 income because it was constructively received in 2013. 1040x return Checks. 1040x return   Receipt of a valid check by the end of the tax year is constructive receipt of income in that year, even if you cannot cash or deposit the check until the following year. 1040x return Example. 1040x return Dr. 1040x return Redd received a check for $500 on December 31, 2013, from a patient. 1040x return She could not deposit the check in her business account until January 2, 2014. 1040x return She must include this fee in her income for 2013. 1040x return Debts paid by another person or canceled. 1040x return   If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. 1040x return If you receive income in this way, you constructively receive the income when the debt is canceled or paid. 1040x return For more information, see Canceled Debt under Kinds of Income in chapter 5. 1040x return Repayment of income. 1040x return   If you include an amount in income and in a later year you have to repay all or part of it, you can usually deduct the repayment in the year in which you make it. 1040x return If the amount you repay is over $3,000, a special rule applies. 1040x return For details about the special rule, see Repayments in chapter 11 of Publication 535, Business Expenses. 1040x return Expenses Under the cash method, you generally deduct expenses in the tax year in which you actually pay them. 1040x return This includes business expenses for which you contest liability. 1040x return However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules. 1040x return Expenses paid in advance. 1040x return   You can deduct an expense you pay in advance only in the year to which it applies. 1040x return Example. 1040x return You are a calendar year taxpayer and you pay $1,000 in 2013 for a business insurance policy effective for one year, beginning July 1. 1040x return You can deduct $500 in 2013 and $500 in 2014. 1040x return Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. 1040x return The purpose of an accrual method of accounting is to match income and expenses in the correct year. 1040x return Income—General Rule Under an accrual method, you generally include an amount in your gross income for the tax year in which all events that fix your right to receive the income have occurred and you can determine the amount with reasonable accuracy. 1040x return Example. 1040x return You are a calendar year accrual method taxpayer. 1040x return You sold a computer on December 28, 2013. 1040x return You billed the customer in the first week of January 2014, but you did not receive payment until February 2014. 1040x return You must include the amount received for the computer in your 2013 income. 1040x return Income—Special Rules The following are special rules that apply to advance payments, estimating income, and changing a payment schedule for services. 1040x return Estimated income. 1040x return   If you include a reasonably estimated amount in gross income, and later determine the exact amount is different, take the difference into account in the tax year in which you make the determination. 1040x return Change in payment schedule for services. 1040x return   If you perform services for a basic rate specified in a contract, you must accrue the income at the basic rate, even if you agree to receive payments at a lower rate until you complete the services and then receive the difference. 1040x return Advance payments for services. 1040x return   Generally, you report an advance payment for services to be performed in a later tax year as income in the year you receive the payment. 1040x return However, if you receive an advance payment for services you agree to perform by the end of the next tax year, you can elect to postpone including the advance payment in income until the next tax year. 1040x return However, you cannot postpone including any payment beyond that tax year. 1040x return   For more information, see Advance Payment for Services under Accrual Method in Publication 538. 1040x return That publication also explains special rules for reporting the following types of income. 1040x return Advance payments for service agreements. 1040x return Prepaid rent. 1040x return Advance payments for sales. 1040x return   Special rules apply to including income from advance payments on agreements for future sales or other dispositions of goods you hold primarily for sale to your customers in the ordinary course of your business. 1040x return If the advance payments are for contracts involving both the sale and service of goods, it may be necessary to treat them as two agreements. 1040x return An agreement includes a gift certificate that can be redeemed for goods. 1040x return Treat amounts that are due and payable as amounts you received. 1040x return   You generally include an advance payment in income for the tax year in which you receive it. 1040x return However, you can use an alternative method. 1040x return For information about the alternative method, see Publication 538. 1040x return Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. 1040x return The all-events test has been met. 1040x return The test has been met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. 1040x return Economic performance has occurred. 1040x return Economic performance. 1040x return   You generally cannot deduct or capitalize a business expense until economic performance occurs. 1040x return If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. 1040x return If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. 1040x return An exception allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. 1040x return For more information on economic performance, see Economic Performance under Accrual Method in Publication 538. 1040x return Example. 1040x return You are a calendar year taxpayer and use an accrual method of accounting. 1040x return You buy office supplies in December 2013. 1040x return You receive the supplies and the bill in December, but you pay the bill in January 2014. 1040x return You can deduct the expense in 2013 because all events that fix the fact of liability have occurred, the amount of the liability could be reasonably determined, and economic performance occurred in that year. 1040x return Your office supplies may qualify as a recurring expense. 1040x return In that case, you can deduct them in 2013 even if the supplies are not delivered until 2014 (when economic performance occurs). 1040x return Keeping inventories. 1040x return   When the production, purchase, or sale of merchandise is an income-producing factor in your business, you must generally take inventories into account at the beginning and the end of your tax year. 1040x return If you must account for an inventory, you must generally use an accrual method of accounting for your purchases and sales. 1040x return For more information, see Inventories , later. 1040x return Special rule for related persons. 1040x return   You cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until you make the payment and the corresponding amount is includible in the related person's gross income. 1040x return Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. 1040x return If a deduction is not allowed under this rule, the rule will continue to apply even if your relationship with the person ends before the expense or interest is includible in the gross income of that person. 1040x return   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. 1040x return For a list of other related persons, see section 267 of the Internal Revenue Code. 1040x return Combination Method You can generally use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. 1040x return However, the following restrictions apply. 1040x return If an inventory is necessary to account for your income, you must generally use an accrual method for purchases and sales. 1040x return (See, however, Inventories, later. 1040x return ) You can use the cash method for all other items of income and expenses. 1040x return If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. 1040x return If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. 1040x return If you use a combination method that includes the cash method, treat that combination method as the cash method. 1040x return Inventories Generally, if you produce, purchase, or sell merchandise in your business, you must keep an inventory and use the accrual method for purchases and sales of merchandise. 1040x return However, the following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. 1040x return These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later). 1040x return A qualifying taxpayer under Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. 1040x return A qualifying small business taxpayer under Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. 1040x return Qualifying taxpayer. 1040x return   You are a qualifying taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 17, 1998, is $1 million or less. 1040x return (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing by 3. 1040x return ) Your business is not a tax shelter, as defined under section 448(d)(3) of the Internal Revenue Code. 1040x return Qualifying small business taxpayer. 1040x return   You are a qualifying small business taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 31, 2000, is more than $1 million but not more than $10 million. 1040x return (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. 1040x return ) You are not prohibited from using the cash method under section 448 of the Internal Revenue Code. 1040x return Your principal business activity is an eligible business (described in Publication 538 and Revenue Procedure 2002-28). 1040x return Business not owned or not in existence for 3 years. 1040x return   If you did not own your business for all of the 3-tax-year period used in figuring your average annual gross receipts, include the period of any predecessor. 1040x return If your business has not been in existence for the 3-tax-year period, base your average on the period it has existed including any short tax years, annualizing the short tax year's gross receipts. 1040x return Materials and supplies that are not incidental. 1040x return   If you account for inventoriable items as materials and supplies that are not incidental, you will deduct the cost of the items you would otherwise include in inventory in the year you sell the items, or the year you pay for them, whichever is later. 1040x return If you are a producer, you can use any reasonable method to estimate the raw material in your work in process and finished goods on hand at the end of the year to determine the raw material used to produce finished goods that were sold during the year. 1040x return Changing accounting method. 1040x return   If you are a qualifying taxpayer or qualifying small business taxpayer and want to change to the cash method or to account for inventoriable items as non-incidental materials and supplies, you must file Form 3115, Application for Change in Accounting Method. 1040x return See Change in Accounting Method, later. 1040x return More information. 1040x return    For more information about the qualifying taxpayer exception, see Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. 1040x return For more information about the qualifying small business taxpayer exception, see Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. 1040x return Items included in inventory. 1040x return   If you are required to account for inventories, include the following items when accounting for your inventory. 1040x return Merchandise or stock in trade. 1040x return Raw materials. 1040x return Work in process. 1040x return Finished products. 1040x return Supplies that physically become a part of the item intended for sale. 1040x return Valuing inventory. 1040x return   You must value your inventory at the beginning and end of each tax year to determine your cost of goods sold (Schedule C, line 42). 1040x return To determine the value of your inventory, you need a method for identifying the items in your inventory and a method for valuing these items. 1040x return   Inventory valuation rules cannot be the same for all kinds of businesses. 1040x return The method you use to value your inventory must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. 1040x return Your inventory practices must be consistent from year to year. 1040x return More information. 1040x return   For more information about inventories, see Publication 538. 1040x return Uniform Capitalization Rules Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for production or resale activities. 1040x return Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. 1040x return You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. 1040x return Activities subject to the uniform capitalization rules. 1040x return   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. 1040x return Produce real or tangible personal property. 1040x return For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. 1040x return Acquire property for resale. 1040x return Exceptions. 1040x return   These rules do not apply to the following property. 1040x return Personal property you acquire for resale if your average annual gross receipts are $10 million or less. 1040x return Property you produce if you meet either of the following conditions. 1040x return Your indirect costs of producing the property are $200,000 or less. 1040x return You use the cash method of accounting and do not account for inventories. 1040x return For more information, see Inventories, earlier. 1040x return Special Methods There are special methods of accounting for certain items of income or expense. 1040x return These include the following. 1040x return Amortization, discussed in chapter 8 of Publication 535, Business Expenses. 1040x return Bad debts, discussed in chapter 10 of Publication 535. 1040x return Depletion, discussed in chapter 9 of Publication 535. 1040x return Depreciation, discussed in Publication 946, How To Depreciate Property. 1040x return Installment sales, discussed in Publication 537, Installment Sales. 1040x return Change in Accounting Method Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. 1040x return A change in your accounting method includes a change in: Your overall method, such as from cash to an accrual method, and Your treatment of any material item. 1040x return To get approval, you must file Form 3115, Application for Change in Accounting Method. 1040x return You can get IRS approval to change an accounting method under either the automatic change procedures or the advance consent request procedures. 1040x return You may have to pay a user fee. 1040x return For more information, see the form instructions. 1040x return Automatic change procedures. 1040x return   Certain taxpayers can presume to have IRS approval to change their method of accounting. 1040x return The approval is granted for the tax year for which the taxpayer requests a change (year of change), if the taxpayer complies with the provisions of the automatic change procedures. 1040x return No user fee is required for an application filed under an automatic change procedure generally covered in Revenue Procedure 2002-9. 1040x return   Generally, you must use Form 3115 to request an automatic change. 1040x return For more information, see the Instructions for Form 3115. 1040x return Prev  Up  Next   Home   More Online Publications