What Is the Difference Between Fiscal Year & Calendar Year for a Business?

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.

Calendar Year

A calendar year is defined by the IRS as a 12-month period beginning Jan. 1 and ending Dec. 31.

Fiscal Year

A fiscal year is 12 consecutive months not between January and December and that ends on the last day of a month. A 52-53 week tax year, which is a type of fiscal year that alternates between a 52-week year and a 53-week year, 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.

Required Tax Years

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.

Restructuring

A business must continue to use its adopted tax year even if there are changes to how the business is structured unless the owner gets the change approved by the IRS.

References

• IRS.gov: Tax years
• IRSTaxMap.com: Accounting Periods and Methods

Resources

• IRS.gov: Tax Calendar for Small Businesses and Self-Employed
• IRS.gov: Small Business/Self-Employed Virtual Small Business Tax Workshop