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Rounding Off to Whole

income. The gain or loss taken into account is

Deposit Processing, P.O. Box 970030, St.

generally treated as ordinary gain or loss.

Louis, MO 63197. Make the check or money

Dollars

order payable to “Financial Agent.”

For details, including exceptions, see

The fund may round off cents to whole dollars

To help ensure proper crediting, write the

section 475, the related regulations, and Rev.

on its return and schedules. If the fund does

fund’s EIN, the tax period to which the deposit

Rul. 94-7, 1994-1 C.B. 151.

round to whole dollars, it must round all

applies, and “Form 1120-RIC” on the check or

Dealers in commodities and traders in

amounts. To round, drop amounts under 50

money order. Be sure to darken the “1120” box

securities and commodities may elect to use

cents and increase amounts from 50 cents to

on the coupon. Records of these deposits will

the mark-to-market accounting method. To

99 cents to the next dollar (for example, $1.39

be sent to the IRS.

make the election, the fund must file a

becomes $1 and $2.50 becomes $3).

For more information on deposits, see the

statement describing the election, the first tax

If two or more amounts must be added to

instructions in the coupon booklet (Form 8109)

year the election is to be effective, and in the

figure the amount to enter on a line, include

and Pub. 583, Starting a Business and

case of an election for traders in securities or

cents when adding the amounts and round off

Keeping Records.

commodities, the trade or business for which

only the total.

the election is made. Except for new taxpayers,

If the fund owes tax when it files Form

the statement must be filed by the due date

1120-RIC, do not include the payment

Recordkeeping

(not including extensions) of the income tax

with the tax return. Instead, mail or

CAUTION

return for the tax year immediately preceding

Keep the fund’s records for as long as they

deliver the payment with Form 8109 to an

the election year and attached to that return, or

may be needed for administration of any

authorized depositary or use EFTPS, if

if applicable, to a request for an extension of

provision of the Internal Revenue Code.

applicable.

time to file that return. For more details, see

Usually, records that support an item of

Rev. Proc. 99-17, 1999-1 C.B. 503, and

income, deduction, or credit on the return must

Estimated Tax Payments

sections 475(e) and (f).

be kept for 3 years from the date the return is

due or filed, whichever is later. Keep records

Change in accounting method. To change

Generally, the following rules apply to the

that verify the fund’s basis in property for as

its method of accounting used to report taxable

fund’s payments of estimated tax.

long as they are needed to figure the basis of

•

income (for income as a whole or for any

The fund must make installment payments of

the original or replacement property.

material item), the fund must file Form 3115,

estimated tax if it expects its total tax for the

Application for Change in Accounting Method.

The fund should keep copies of all filed

year (less applicable credits) to be $500 or

For more information, see Form 3115 and Pub.

returns. They help in preparing future and

more. For estimated tax purposes, the

538, Accounting Periods and Methods.

amended returns.

estimated tax of the fund is defined as its

Section 481(a) adjustment. The fund may

alternative minimum tax less the credit for

Depository Method of Tax

Federal tax on fuels.

have to make an adjustment to prevent

•

amounts of income or expenses from being

The installments are due by the 15th day of

Payment

duplicated. This is called a section 481(a)

the 4th, 6th, 9th, and 12th months of the tax

The fund must pay the tax due in full no later

year. If any date falls on a Saturday, Sunday,

adjustment. The section 481(a) adjustment

than the 15th day of the 3rd month after the

period is generally 1 year for a net negative

or legal holiday, the installment is due on the

end of the tax year. The two methods of

adjustment and 4 years for a net positive

next regular business day.

•

depositing income taxes, including capital

Use Form 1120-W, Estimated Tax for

adjustment. However, a fund may elect to use

gains tax, are discussed below.

a 1-year adjustment period if the net section

Corporations, as a worksheet to compute

481(a) adjustment for the change is less than

estimated tax.

Electronic Deposit Requirement

•

If the fund does not use EFTPS, use the

$25,000. The fund must complete the

The fund must make electronic deposits of all

appropriate lines of Form 3115 to make the

deposit coupons (Forms 8109) to make

election.

depository taxes (such as employment tax,

deposits of estimated tax.

excise tax, and income tax) using the

For more information on estimated tax

Include any net positive section 481(a)

Electronic Federal Tax Payment System

payments, including penalties that apply if the

adjustment on Form 1120-RIC, line 7. If the net

(EFTPS) in 2004 if:

fund fails to make required payments, see the

section 481(a) adjustment is negative, report it

•

The total deposits of such taxes in 2002

instructions for line 29 on page 9.

on Form 1120-RIC, line 22.

were more than $200,000 or

Overpaid estimated tax. If the fund overpaid

•

The fund was required to use EFTPS in

estimated tax, it may be able to get a quick

Accounting Periods

2003.

refund by filing Form 4466, Corporation

A fund must figure its taxable income on the

Depositing on time. If the fund is required to

Application for Quick Refund of Overpayment

basis of a tax year. A tax year is the annual

use EFTPS and fails to do so, it may be

of Estimated Tax. The overpayment must be at

accounting period a fund uses to keep its

subject to a 10% penalty. If the fund is not

least 10% of the expected income tax liability

records and report its income and expenses.

required to use EFTPS, it may participate

and at least $500. To apply for a quick refund,

Funds can use a calendar year or a fiscal year.

voluntarily. To enroll in or get more information

file Form 4466 before the 16th day of the 3rd

about EFTPS, call 1-800-555-4477 or

month after the end of the tax year, but before

For more information about accounting

1-800-945-8400. To enroll online, visit

the fund files its income tax return. Do not file

periods, see Regulations section 1.441-1,

Form 4466 before the end of the fund’s tax

1.441-2, and Pub. 538.

year.

For EFTPS deposits to be made timely, the

Calendar year. If the calendar year is adopted

fund must initiate the transaction at least one

as the annual accounting period, the fund must

Interest and Penalties

business day before the date the deposit is

maintain its books and records and report its

due.

income and expenses for the period from

Interest. Interest is charged on taxes paid late

January 1 through December 31 of each year.

even if an extension of time to file is granted.

Deposits With Form 8109

Interest is also charged on penalties imposed

Fiscal year. A fiscal year is 12 consecutive

If the fund does not use EFTPS, deposit fund

for failure to file, negligence, fraud, substantial

months ending on the last day of any month

income tax payments (and estimated tax

valuation misstatements, and substantial

except December. A 52-53 week year is a

payments) with Form 8109, Federal Tax

understatements of tax from the due date

fiscal year that varies from 52 to 53 weeks.

Deposit Coupon. If you do not have a

(including extensions) to the date of payment.

Adoption of tax year. A fund adopts a tax

preprinted Form 8109, use Form 8109-B to

The interest charge is figured at a rate

year when it files its first income tax return. It

make deposits. You can get this form by calling

determined under section 6621.

must adopt a tax year by the due date (not

1-800-829-4933. Be sure to have your EIN

Penalty for late filing of return. A fund that

including extensions) of its first income tax

ready when you call.

does not file its tax return by the due date,

return.

Do not send deposits directly to an IRS

including extensions, may be penalized 5% of

Change of tax year. Generally, a fund must

office; otherwise, the fund may have to pay a

the unpaid tax for each month or part of a

get the consent of the IRS before changing its

penalty. Mail or deliver the completed Form

month the return is late, up to a maximum of

tax year by filing Form 1128, Application To

8109 with the payment to an authorized

25% of the unpaid tax. The minimum penalty

Adopt, Change, or Retain a Tax Year.

depositary (i.e., a commercial bank or other

for a return that is over 60 days late is the

However, under certain conditions, a fund may

financial institution authorized to accept

smaller of the tax due or $100. The penalty will

change its tax year without getting the consent.

Federal tax deposits). Make checks or money

not be imposed if the fund can show that the

orders payable to the depositary.

For more information on change of tax year,

failure to file on time was due to reasonable

see Form 1128, Regulations section 1.442 – 1,

If the fund prefers, it may mail the coupon

cause. Funds that file late must attach a

and Pub. 538.

and payment to Financial Agent, Federal Tax

statement explaining the reasonable cause.

-5-

Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - 2003 Page 5

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