Brady and Company, P.C.
Brady and Company, P.C.


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Section 444 Elections and Section 7519 Payments

By Timothy Jalbert

Section 444 of the IRC allows S corporations and Partnerships to elect a tax year that is not a “permitted year” (a year ended December 31 or a year end approved by the Secretary for a business purpose).  The election is made on by filing Form 8716 “Election to Have a Tax Year Other Than a Required Tax Year.” When such an election is made, Section 7519 requires that the S corporation make required payment(s) to the IRS equal to the amount of tax that would have been paid by the shareholders if the S corporation had a calendar year end.  The payment(s) made is held “on deposit” and is a cumulative balance.  Note, if the calculated amount due is less than $500 then no payment is required.  The required payment is due on or before May 15 of the following calendar year in which the election year began.

Calculation of the Required Payment (example)

The required payment is calculated as follows:






Base Year Net Income


Must be positive number


Deferral ratio


Number of deferred months divided by 12


Deferred Base Year Income


Line 1 x line 2


Applicable base year payments


Payments made in base year


Net applicable payments


Line 2 x line 4


Actual applicable payments made during the deferral period


In this example the S corporation made no applicable payments in the deferral period


Applicable payment amount


Greater of (Line 5 - Line 6) or 0


Net base year income


Line 3 + Line 7


Tax rate


40.6% for 2014


Required Payment


Line 8 x Line 9


Required payments “on deposit”


Net carryover from base year


Total required payment (refund) for current year


Line 10 – Line 11

  1. S Corporation with a 9/30/14 year end having made a 444 election.


Based on the above example, the S corporation taxpayer would have to make a payment of $7,195 by May 15, 2015 and would have an “on deposit” applicable payment amount of $13,195 to be used in the following year’s calculation.

Payment Procedure

Form 8752 is used to calculate the Section 7519 payment (or refund).  The payment can be made electronically or by filing the Form 8752 “Required Payment or Refund Under Section 7519.”  If a Form 8752 is filed, it should be file separately.  If a Form 8752 is filed and a mistake is later found, a new Form 8752 may be filed with the corrected information and the words “Amended Return” should be written across the top of the form.

For more information or assistance with IRC Section 444 Elections and Section 7519 Payments call Timothy Jalbert or Thomas Brady at (781) 273-3000.

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