SUP STAT (Form 1128) (Revised)

SUPPORTING STATEMENT

Internal Revenue Service

(Form 1128) Application to Adopt, Change, or Retain a Tax Year

OMB #1545-0134

1. CIRCUMSTANCES NECESSITATING COLLECTION OF INFORMATION

Section 442 of the Internal Revenue Code requires that a change in a taxpayer’s annual accounting period be approved by the Secretary. Under section 1.442-1(b) of the Income Tax Regulations, a taxpayer must file Form 1128 to secure prior approval unless the taxpayer can automatically make the change.

2. USE OF DATA

This data is used by IRS to ascertain whether a taxpayer has a business purpose for making the change. Consideration will be given as to whether the taxpayer has complied with the regulations and established a business purpose for making the change. The agreement between the taxpayer and IRS under which the change will be made shall, if appropriate, provide terms, conditions, and adjustments necessary to prevent a substantial distortion of income.

3. USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN

We have no plans at this time to offer electronic filing because of the low volume compared to the cost of electronic enabling.

4. EFFORTS TO IDENTIFY DUPLICATION

The information obtained through this collection is unique and is not already available for use or adaptation from another source.

5. METHODS TO MINIMIZE BURDEN ON SMALL BUSINESSES OR OTHER SMALL ENTITIES

The collection of information requirement will not have a significant economic impact on a substantial number of small entities.

6. CONSEQUENCES OF LESS FREQUENT COLLECTION ON FEDERAL PROGRAMS OR POLICY ACTIVITIES

In order to secure the approval of the Commissioner to adopt, change, or retain an annual accounting period, a taxpayer must file an application, generally on Form 1128, “Application To Adopt, Change, or Retain a Tax Year,” with the Commissioner within such time and in such manner as is provided in administrative procedures published in TD 8996 (1545-1748).

Failure to collect the information will prevent taxpayers from adopting, changing, or retaining an annual accounting period.

7. SPECIAL CIRCUMSTANCES REQUIRING DATA COLLECTION TO BE INCONSISTENT WITH GUIDELINES IN 5 CFR 1320.5(d)(2)

There are no special circumstances requiring data collection to be inconsistent with Guidelines in 5 CFR 1320.5(d)(2).

8. CONSULTATION WITH INDIVIDUALS OUTSIDE OF THE AGENCY ON AVAILABILITY OF DATA, FREQUENCY OF COLLECTION, CLARITY OF INSTRUCTIONS AND FORMS, AND DATA ELEMENTS

In response to the Federal Register notice dated November 25, 2019 (84 FR 64964), we received no comments during the comment period regarding Form 1128.

9. EXPLANATION OF DECISION TO PROVIDE ANY PAYMENT OR GIFT TO

RESPONDENTS

No payment or gift will be provided to any respondents.

10. ASSURANCE OF CONFIDENTIALITY OF RESPONSES

Generally, tax returns and tax return information are confidential as required by 26 USC 6103.

11. JUSTIFICATION OF SENSITIVE QUESTIONS

A privacy impact assessment (PIA) has been conducted for information collected under this request as part of the “Business Master File, BMF” system and a Privacy Act System of Records notice (SORN) has been issued for this system under:

Treas/IRS 24.046 BMF/Treas/IRS 34.047 Audit trail and security records system

The Internal Revenue Service PIA’s can be found at https://www.irs.gov/uac/Privacy-Impact-Assessments-PIA.

Title 26 USC 6109 requires inclusion of identifying numbers in returns, statements, or other documents for securing proper identification of persons required to make such returns, statements, or documents and is the authority for social security numbers (SSNs) in IRS systems.

12. ESTIMATED BURDEN OF INFORMATION COLLECTION

The burden for individual filers is being reported under 1545-0074 and business filers are being reported under 1545-0123. These estimates are for estates, tax-exempt organizations, and cooperatives.

Authority	Description	Number of Responses	#Responses per Respondent	Annual Responses	Hours per Response	Total Burden
IRC §442	Form 1128 PT I & II	7,788	1	7,788	20.73	161,446
	Form 1128 PT I & III	2,000	1	2,000	35.31	70,620
Totals		9,788		9,788		232,066

We have reviewed the following regulations and have determined that the reporting requirements contained in them are entirely reflected on the form. The justification appearing in Item I of the supporting statement applies both to these regulations and to the form. Please continue to assign OMB number 1545-0134 to these regulations.

1.442-1

1.706-1(b)

The Privacy Act Notice can be found in the forms instructions.

13. ESTIMATED TOTAL ANNUAL COST BURDEN TO RESPONDENTS

To ensure more accuracy and consistency across its information collections, IRS is currently in the process of revising the methodology it uses to estimate burden and costs. Once this methodology is complete, IRS will update this information collection to reflect a more precise estimate of burden and costs.

14. ESTIMATED ANNUALIZED COST TO THE FEDERAL GOVERNMENT

The Federal government cost estimate is based on a model that considers the following three cost factors for each information product: aggregate labor costs for development, including annualized start up expenses, operating and maintenance expenses, and distribution of the product that collects the information.

The government computes cost using a multi-step process. First, the government creates a weighted factor for the level of effort to create each information collection product based on variables such as; complexity, number of pages, type of product and frequency of revision. Second, the total costs associated with developing the product such as labor cost, and operating expenses associated with the downstream impact such as support functions, are added together to obtain the aggregated total cost. Then, the aggregated total cost and factor are multiplied together to obtain the aggregated cost per

product. Lastly, the aggregated cost per product is added to the cost of shipping and printing each product to IRS offices, National Distribution Center, libraries and other outlets. The result is the Government cost estimate per product.

The government cost estimate for this collection is summarized in the table below.

Product	Aggregate Cost per Product (factor applied)		Printing and Distribution		Government Cost Estimate per Product
Form 1128	12,758	+	0	=	12,758
Instructions	3,645		0		3,645
Grand Total	16,403				16,403
Table costs are based on 2018 actuals obtained from IRS Chief Financial Office and Media and Publications
* New product costs will be included in the next collection update.

15. REASONS FOR CHANGE IN BURDEN

There is no change to the paperwork burden previously approved by OMB. IRS is making this submission for renewal purposes.

16. PLANS FOR TABULATION, STATISTICAL ANALYSIS AND PUBLICATION

There are no plans for tabulation, statistical analysis, and publication.

17. REASONS WHY DISPLAYING THE OMB EXPIRATION DATE IS INAPPROPRIATE

IRS believes that displaying the OMB expiration date is inappropriate because it could

cause confusion by leading taxpayers to believe that the form sunsets as of the expiration

date. Taxpayers are not likely to be aware that the IRS intends to request renewal of the

OMB approval and obtain a new expiration date before the old one expires.

18. EXCEPTIONS TO THE CERTIFICATION STATEMENT

There are no exceptions to the certification statement.

Note: The following paragraph applies to all of the collections of information in this

submission:

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

6