Tax Year


A tax year (technically, “taxable” year) is the annual accounting period that a taxpayer uses for determining and reporting tax liability. The two types are the Calendar Year and the Fiscal Year.


A calendar year for tax purposes is exactly what the name implies: January 1 through December 31.


A fiscal year is a tax year that ends at the end of any month except December.1


Individuals, including someone operating a Sole Proprietorship, always uses the calendar year.


A Business Entity other than a sole proprietorship may use a fiscal year if it can establish a business purpose (e.g., it has a natural business cycle other than a calendar year).2 In most cases, however, the one-owner or husband-and-wife business will have to use a calendar year, regardless of the business entity they use.



1           IRC Section 441(e). Technically, a fiscal year can also be a 52-53 week year, but this is too unusual to discuss here.

2           Reg. Section 1.442-1(b)(2).