December 2, 2018

Corporation With A Fiscal Tax Year? You Have A Corporate Tax Return Headache This Year

If you own a business organized as a corporation with a fiscal tax year, you have a corporate tax return preparation headache this year.

How so?  Glad you asked!

For fiscal year corporate tax returns including dates in both 2017 and 2018,  you have 2 different sets of federal tax codes and corporate tax rates to consider when preparing your corporate tax return:  those before January 1, 2018, and those on and after January 1, 2018.  If the individual who prepared your corporate tax return did not accurately prepare the return using these 'blended' regulations and tax rates, you should prepare and file an amended corporate tax return.

Corporate Tax Return Preparation

Here's what the IRS has to say about this corporate tax headache in IRS Tax Tip  2018-173:

Last year’s tax reform legislation replaced the graduated corporate tax structure with a flat 21 percent corporate tax rate. This new maximum tax rate for corporations is effective for tax years beginning after Dec. 31, 2017.

A corporation with a fiscal year that includes Jan. 1, 2018, will pay federal income tax using what is called a blended tax rate. They will not use the flat 21 percent tax rate for their entire fiscal year. To calculate their blended tax rate, these corporations will:
  • First calculate their tax for the entire taxable year using the tax rates that were in effect prior to the Tax Cuts and Jobs Act.
  • Then calculate their tax using the new 21 percent rate.
  • Proportion each tax amount based on the number of days in the taxable year when the different rates were in effect. 
  • Take the sum of these two amounts, which is the corporation’s federal income tax for the fiscal year.
The blended rate applies to all fiscal year corporations whose fiscal year includes Jan. 1, 2018.

I welcome your phone call or email if you have questions about this important matter.

Tax Concerns?
About Mary Rae Fouts, EA

Mary Rae Fouts, EA provides tax, insurance consulting, and expert witness services to clients who have technical or complex concerns.  For more information about Mary and her professional services visit

Mary Rae Fouts

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