Change in Tax Year

[Diane]

My client, a C corp since 1973, provided engineering services. Up until

5 years ago it was an active company with employees. No problem. The C

corp had a fiscal year end of June. Has filed tax returns since 1973 as

a June year end. The company is currently only active doing small jobs

and collecting some receivables still owed to them. There are no

employees. They are running with a big NOL carryover. No taxes due, no

payroll, etc. The original owner has retired and turned the stock over

to his son. The IRS sent a letter stating that the company now seemed

to be a Personal Service Company. After reading up on PSC I filed the

June 2007 (2006 Return) as a PSC (with the NOL, so no taxes due). Now

IRS says that the corporation should have filed for a Change in Tax

Year to a calendar year using Form 1128. On the Form 1128 there is a

box to check to retain the current tax year. The company would like to

retain its tax year. My question: Did I do right in filing as a PSC?

and how should I fill out the Form 1128? I'm just no familiar with the

form (or, for that matter, a PSC).

Diane