The Internal Revenue Service recognizes two types of tax years for businesses that are filing income tax returns: a calendar year and a fiscal year. Some businesses must follow a calendar year when filing taxes, while others have flexibility in choosing to follow a fiscal year system.
A calendar year is defined by the Internal Revenue Service as a 12-month period beginning Jan. 1 and ending Dec. 31.
A fiscal year typically is a period of 12 consecutive months that begins on the first of the month and ends on the last day of the 12th month. The first month of the calendar is never January under the fiscal year setup. Some businesses follow a 52-53 week fiscal year, which alternates between a 52-week year and a 53-week year. It does not have to end on the last day of a month.
How to Choose
A new business adopts a tax year by filing its first income tax return under the tax year of its choice. All businesses are allowed to adopt the calendar year, but businesses that do not keep books or do not have an annual accounting period are required to use one. S corporations are required to either use the calendar year or a 52-53 week tax year ending on Dec. 31.
A business must continue to use its adopted tax year, even if it makes changes to how the business is structured. The tax-year format can be changed only with approval of the IRS.
- IRS.gov: Tax Years
- IRSTaxMap.com: Accounting Periods and Methods
- Internal Revenue Service. "Topic No. 301: When, How, and Where to File." Accessed Jan. 27, 2020.
- Internal Revenue Service. "Tax Years." Accessed Jan. 27, 2020.
- Virginia Department of Taxation. "Individual Income Tax Filing Due Dates." Accessed Jan. 27, 2020.
- New Hampshire Department of Revenue. "Taxpayer Assistance: Overview of New Hampshire Taxes." Accessed Jan. 27, 2020.
- New Hampshire Statutes: "Title V: Taxation. Section 76.2: Property Tax Year." Accessed Jan. 27, 2020.
- Internal Revenue Service. "Publication 538: Accounting Periods and Methods," Page 4. Accessed Jan. 27, 2020.
- Internal Revenue Service. "Publication 538: Accounting Periods and Methods," Pages 3-4. Accessed Jan. 27, 2020.
- Library of Congress. "History of the US Income Tax." Accessed Jan. 28, 2020.
- Commissioner of Internal Revenue. "Annual Report for the Fiscal Year Ended June 30, 1955," Page 9. Accessed Jan. 28, 2020.
- Internal Revenue Service. "Historical Highlights of the IRS." Accessed Jan. 28, 2020.
Based in Falls Church, Va., Kinsey Cooper has been writing construction-related articles for three years. Her articles have appeared in various industry publications and on related websites. She has a Bachelor of Arts in journalism from New Mexico State University.