Introduction: What is IRS Form 8716?
IRS Form 8716, titled Election To Have a Tax Year Other Than a Required Tax Year, is an official business tax election form administered by the Internal Revenue Service (IRS) under the Department of the Treasury. It is authorized under Internal Revenue Code (IRC) Section 444 and Treasury Regulations § 1.444-1T through § 1.444-4T.
By default, federal tax law requires pass-through entities and personal service businesses to operate on a standardized calendar tax year ending December 31. Form 8716 is the formal legal document an eligible partnership, S corporation, or Personal Service Corporation (PSC) submits to the IRS to elect a fiscal tax year instead of the mandatory calendar year.
Purpose of the Form: Why Form 8716 Exists
Because partnerships and S corporations pass their income directly to owners’ individual tax returns, Congress historically mandated that pass-through businesses align their accounting periods with their owners’ calendar tax years (ending December 31). However, forcing millions of businesses onto a December 31 year-end creates severe administrative bottlenecks for accounting firms, corporate bookkeepers, and seasonal companies.
Form 8716 provides a statutory compromise under IRC Section 444. It allows eligible entities to choose a fiscal year with a deferral period of up to three months (such as a tax year ending September 30, October 31, or November 30), provided the entity complies with federal tax-neutrality rules to eliminate any unfair tax deferral advantages.
Who Needs to File This Form?
Form 8716 must be filed by qualifying business entities that wish to establish, retain, or change to a Section 444 fiscal tax year. Eligible filers include:
- Partnerships & Multi-Member LLCs: General partnerships, limited partnerships, and LLCs taxed as partnerships filing Form 1065.
- S Corporations: Small business corporations filing Form 1120-S that want to operate on a fiscal year rather than a calendar year.
- Personal Service Corporations (PSCs): C corporations whose primary activity is the performance of personal services (such as law, healthcare, accounting, engineering, architecture, or consulting) performed by employee-owners.
Who Is Exempt / Not Required to File?
A business does not need to file Form 8716 in the following situations:
- Standard Calendar-Year Entities: Businesses operating on a standard calendar tax year ending December 31.
- Regular C Corporations: Standard C corporations (that are not Personal Service Corporations) have the freedom under the tax code to select any fiscal year-end on their initial Form 1120 without filing Form 8716.
- Natural Business Year Filers (Form 1128): Entities establishing a non-calendar year based on a proven “business purpose” (such as a seasonal retailer using a natural business year ending January 31) file Form 1128 under IRC Section 442 instead.
- Sole Proprietorships: Individual sole proprietors reporting on Schedule C must always match their individual calendar tax year.
The 3-Month Deferral Limit Rule
Under IRC Section 444(b)(1), an election to adopt or change a tax year is strictly limited by the deferral period. The deferral period is the number of months between the close of the elected fiscal tax year and the close of the required tax year (December 31):
- Maximum 3-Month Deferral: The elected tax year cannot have a deferral period longer than 3 months.
- Permissible Fiscal Year-Ends: For a business whose required year-end is December 31, the only allowable Section 444 fiscal year-ends are:
- September 30 (3-month deferral)
- October 31 (2-month deferral)
- November 30 (1-month deferral)
- Note: A fiscal year ending June 30 or August 31 has a deferral period exceeding 3 months and cannot be elected on Form 8716.
The Ongoing Trade-Offs: Form 8752 and Section 280H
Making a Section 444 election comes with mandatory annual compliance obligations designed to prevent tax avoidance:
| Entity Type | Governing Code | Mandatory Requirement | Associated Annual Filing |
|---|---|---|---|
| Partnerships & S Corporations | IRC § 7519 | Must make an annual non-interest-bearing “Required Payment” deposit to the IRS to offset the value of the tax deferral to owners. | Form 8752 (Due annually by May 15). |
| Personal Service Corporations | IRC § 280H | Must satisfy minimum distribution requirements for salaries and bonuses paid to employee-owners, or face deduction caps. | Schedule H (Form 1120). |
When to File: Deadlines and Timing Rules
Form 8716 is an event-driven election return governed by strict statutory deadlines under Treasury Regulation § 1.444-3T.
Form 8716 must be filed on or before the earlier of:
- The 15th day of the 5th month following the month that includes the first day of the tax year for which the election will first be effective (e.g., May 15 for a fiscal year beginning January 1, or February 15 for a fiscal year beginning October 1); OR
- The due date (without extensions) of the income tax return resulting from the Section 444 election.
Where and How to File Form 8716
Form 8716 is a standalone paper election document submitted directly to the IRS:
- Standalone Submission: Mail the signed original Form 8716 directly to the IRS Service Center where the entity files its annual income tax returns (typically the IRS Center in Ogden, Utah, or Kansas City, Missouri, as per instructions).
- Mandatory Tax Return Attachment: The entity must also attach a copy of the filed Form 8716 to its first annual income tax return (Form 1065, Form 1120-S, or Form 1120) for the election year.
- No User Fee: There is no IRS user fee required to submit Form 8716.
Step-by-Step Instructions to Fill Out Form 8716
Form 8716 is a clean, single-page document divided into entity identification, election options, and signature authorization. Complete each part using the instructions below:
| Section / Line | Field Description | Instructions |
|---|---|---|
| Header Details | Entity Identification | Enter the legal business name, Employer Identification Number (EIN), and complete mailing address of the partnership, S corp, or PSC. |
| Part I (Line 1) | Entity Classification | Check the box indicating your entity structure: Partnership, S Corporation (or electing S Corp), or Personal Service Corporation (PSC). |
| Part I (Line 2) | Tiered Structure / Ownership | Indicate whether the entity is part of a tiered ownership structure (e.g., owned by another partnership or holding company). |
| Part II (Line 3) | Election Type | Check whether the entity is Adopting a new tax year, Retaining an existing fiscal year, or Changing to a new fiscal year. |
| Part II (Line 4) | Tax Year Months | Enter the ending month of the elected fiscal tax year (e.g., September 30) and the ending month of the required tax year (December 31). |
| Signature Block | Authorized Officer Signature | A general partner, LLC managing member, or corporate officer signs, dates, and enters their official title under penalties of perjury. |
Required Documents and Information Needed Before Filling
Before preparing Form 8716, assemble the following organizational records:
- Employer Identification Number (EIN): The entity’s verified 9-digit federal tax ID number.
- Corporate Bylaws or Operating Agreement: Formal board of directors resolutions or partner agreements establishing the authorized fiscal tax year.
- Form 2553 (for new S Corporations): If a newly formed corporation is electing S corporation status and choosing a Section 444 year, Form 8716 should be coordinated alongside Form 2553.
- Tiered Structure Analysis: Records verifying that the business is not part of an impermissible tiered entity structure under IRC Section 444(d)(3).
Common Mistakes to Avoid
- Electing a Deferral Greater Than 3 Months: Attempting to select a fiscal year ending July 31 or August 31. The maximum allowable deferral under Section 444 is strictly 3 months from December 31.
- Forgetting Annual Form 8752 Filings: S corporations and partnerships failing to file Form 8752 and remit their required payments by May 15 of every subsequent year.
- Missing the 5-Month Filing Window: Submitting Form 8716 after the statutory deadline. Late filings invalidate the election unless private letter ruling relief is granted under Treasury Regulation § 301.9100-3.
- Failing to Attach a Copy to Form 1065 / 1120-S: Submitting the standalone form but forgetting to enclose a copy with the first tax return filed for the new fiscal year.
- Unauthorized Signers: Having an outside accountant or bookkeeper sign the form without holding an authorized corporate officer title or formal Power of Attorney (Form 2848).
Penalties and Consequences of an Invalid Election
Failing to execute Form 8716 properly carries severe tax and operational penalties:
- Automatic Election Termination: If Form 8716 is filed late or improperly, the IRS will reject the election. The entity will be forced onto a mandatory December 31 calendar year, requiring the filing of a short-year tax return.
- Form 8752 Failure-to-Pay Penalties (IRC § 7519(f)(4)): If a partnership or S corporation maintains a Section 444 year but fails to make its required payment on Form 8752, the IRS assesses a 10% penalty on the underpayment, plus daily compounding statutory interest.
- Wilful Neglect Revocation: If an entity willfully fails to comply with Section 7519 payments or Section 280H distributions, the IRS will formally revoke the Section 444 election. Once revoked, the entity can never make a Section 444 election again.
Related Forms or Schedules
- Form 8752: Required Payment or Refund Under Section 7519 (the mandatory annual payment return filed by electing partnerships and S corps).
- Form 1128: Application To Adopt, Change, or Retain a Tax Year (used to request a fiscal year based on a natural business purpose under Section 442).
- Form 2553: Election by a Small Business Corporation (used to elect S corp status).
- Form 1065: U.S. Return of Partnership Income.
- Form 1120-S: U.S. Income Tax Return for an S Corporation.
- Form 1120: U.S. Corporation Income Tax Return (Schedule H reports Section 280H limitations for PSCs).
Frequently Asked Questions
1. How long does a Section 444 election remain in effect?
Once approved, a Section 444 election remains in effect permanently for all subsequent tax years until the entity formally liquidates, converts to an ineligible structure, switches to a calendar year, or has its election revoked by the IRS for non-compliance.
2. What is a “Back-Up Section 444 Election”?
When an entity applies on Form 1128 for a fiscal year based on a “business purpose” under Section 442, it can simultaneously file a “back-up” Form 8716. If the IRS denies the business-purpose request, the back-up Section 444 election automatically activates, preserving a fiscal year-end (up to the 3-month limit).
3. Does a partnership have to pay tax when filing Form 8716?
No tax payment is submitted with Form 8716 itself. However, electing partnerships and S corporations must make their first required payment deposit on Form 8752 on or before May 15 of the following calendar year.
4. Can an entity change from one Section 444 fiscal year to another?
Generally, an entity can change to another fiscal year only if the new year results in a shorter deferral period than the existing year (e.g., moving from an October 31 year-end to a November 30 year-end). Expanding the deferral period is prohibited.
5. What happens to our Form 8752 required payment balance if we terminate the election?
If the entity terminates its Section 444 election and returns to a calendar year, all cumulative non-interest-bearing required payments previously deposited with the IRS are fully refunded back to the business using Form 8752.
6. Can Form 8716 be filed electronically?
Form 8716 is historically a paper-filed election document mailed directly to the designated IRS Service Center in Ogden, Utah, or Kansas City, Missouri. Consult current IRS instructions for any modern electronic filing updates.
Conclusion: Key Takeaways
IRS Form 8716 is the premier tax election form for partnerships, S corporations, and Personal Service Corporations seeking the operational advantages of a fiscal tax year under IRC Section 444. By allowing up to a 3-month deferral from the standard December 31 deadline, it helps businesses avoid tax season compression and align financial reporting with operational cycles.
To maintain a valid election, verify that your deferral period does not exceed three months, submit Form 8716 before the statutory 5-month deadline, attach a copy to your first tax return, and fulfill ongoing annual Form 8752 required payments every May.
