Automatic approval for change of accounting period

[David]

Has anyone filed for automatic approval to change a client's accounting period?

 

I am going over the instructions regarding the gross receipts test. The test doesn't make sense to me since the requirement is that 12 months of sales ending with the month the client would like to be his new year end must equal or exceed 25% of the sales in the last two month period of the requested new year.

 

Of course 12 months of sales will equal or exceed 25% of the last 2 months of sales. It will usually equal more than 100%. What am I missing here?

 

Thanks for your help.

[Gail in Virginia]

It doesn't necessarily follow that 100% exceeds 25% of the last 2 months.  If you have a tax preparation business, and 90% of your income for the year comes in February and March, then if you make your year end 3/31 100% of your 12 month income is not more that 25% of the last two months.  Make sense?

[kcjenkins]

And that rule is aimed specifically at the 'seasonal' business.

[David]

Okay, I must have misread and misunderstood the instructions and the intent of the automatic approval issue.

 

Is the automatic approval granted if the last 2 months of sales for the requested annual accounting period are 25% or more of the annual sales for the requested annual accounting period?

 

So in your example automatic approval would be granted since the last 2 months of sales are 90%.

 

Thanks for helping me with this.