Fiscal Year

What is a fiscal year?

A fiscal year is a 12-month period a business uses for accounting and tax purposes that doesn't follow the standard January-December calendar year. For example, a business might use a fiscal year running from July 1 to June 30, or October 1 to September 30.

The terms fiscal year and financial year are often used interchangeably, though fiscal year specifically implies a non-calendar period.

Why choose a fiscal year?

Businesses choose fiscal years that match their natural business cycles:

• Seasonal businesses — A landscaper might end their fiscal year after their slow winter season when cash and activity are lowest
• Retail businesses — Many end their fiscal year in January, after the holiday rush
• Schools and government — Often use July-June cycles to match academic or budget years
• Construction — Might align with building seasons in their region

Fiscal year considerations

Most sole proprietors must use the calendar year for tax purposes. Other business structures have more flexibility. Once established, changing your fiscal year requires IRS approval. If you're considering a non-calendar fiscal year, consult with your accountant about the implications.