3 Steps to Changing Your Financial Year

Are you looking to change your financial year? Whether your nonprofit group was set up a month or a decade ago, there could be compelling reasons to change your tax year.

For example, if you set up your Booster Club or Parent Group (PTA, PTO, PTSA) on the calendar year, you may have later realized that it would be better to run it along the same timeline as the school year. In this case, a July 1st start date makes more sense than January 1. That way, all of the activities for the year are encapsulated in the same financial year. In short, a calendar year for a school group would not be ideal.

At the same time, you’ll want to make sure your reasons are compelling. Why? Because although it’s not impossible, changing your financial year is a little tedious. Your financial year is identified in your bylaws and is sent to the Secretary of State and often the IRS, so there are some steps that need to be taken to change it.

Changing Your Nonprofit’s Financial Year

1. First, change your bylaws. This usually requires a vote of your membership and/or board.
2. Then, send an amendment to your Secretary of State.
3. Finally, if you are recognized as an exempt nonprofit with the IRS, ask for approval by completing Form 1128.

Suffice to say, the transition period after you change your financial year can be a little awkward. You’ll have to file a short year (on the old tax year start date) to get you to the point of being able to report on your new financial year. But, as they say, you have to go through it to get to the other side. If your reasons for changing your financial year are compelling enough, you’ll be glad you took these steps to get it done.