"Form 8752 - Required Payment or Refund Under Section 7519" is certainly not the clearest form title.
Simply:
The IRS asks Fiscal Year, S Corporations, and Partnerships to file a Form 8752. The IRS then holds in an escrow-like account an estimate of you would have paid if you operated on a calendar year end. Essentially its like a security deposit that a landlord may require from a tenant.
However, since it is "in escrow" you receive a portion of the funds back if your profit decreases from year to year, and your receive the funds back in total if there is a tax loss or the business is dissolved.
For instance, If your profit does not change from year to year, you will not need to make a payment after your first year. Watch what happens with the following example of a September-Year-End company, that closes after its 9th year:
Deferral Period |
|
|
|
25% |
Taxable Profit |
8752 Payment or Refund |
8752 'Escrow' Account |
First Year |
$100,000.00 |
$9,000.00 |
$0.00 |
Second Year |
$100,000.00 |
$0.00 |
$9,000.00 |
Third Year |
$100,000.00 |
$0.00 |
$9,000.00 |
Fourth Year |
$200,000.00 |
$9,000.00 |
$9,000.00 |
Fifth Year |
$0.00 |
-$18,000.00 |
$18,000.00 |
Sixth Year |
$200,000.00 |
$18,000.00 |
$0.00 |
Seventh Year |
$300,000.00 |
$9,000.00 |
$18,000.00 |
Eighth Year |
$500,000.00 |
$18,000.00 |
$27,000.00 |
Ninth Year |
$500,000.00 |
$0.00 |
$45,000.00 |
Escrow Refunded |
$0.00 |
-$45,000.00 |
$45,000.00 |
Note, the negative values of the "8752 Payment or Refund" column are refunds, the positive are payments.