A fiscal year is a one-year period that companies and governments use for financial planning and budgeting. Fiscal years are often utilized by entities with cycles that do not correspond to the calendar year.
For example, the U.S. government’s fiscal year starts on Oct. 1 and ends on Sep. 30. This schedule helps streamline processes like tax collection, budget proposal creation, and routing the proposed budget through Congress for approval.
Key Takeaways
- A fiscal year is a 12-month period chosen by a company or government to align with their planning, budgeting, or revenue cycles.
- Financial reports, external audits, and federal tax filings are often based on a company’s fiscal year.
- Fiscal years facilitate better preparation for the upcoming year.
Turning the Pages on Fiscal Years
A fiscal year is a period lasting one year but does not necessarily start at the beginning of the calendar year. Different countries, companies, and organizations may start and end their fiscal years based on their individual needs and traditions.
Fiscal years that differ from the calendar year are often chosen due to the business’s specific operations. For instance, nonprofit organizations might align their fiscal years with the timing of grant awards. Conversely, a retail business might end its fiscal year on Jan. 31, post-holiday, to tally its largest revenue intake.
Fiscal years are commonly referred to by their end date, for example, “FY 2024” refers to a fiscal year ending on June 30, 2024.
According to the IRS, a fiscal year must consist of 12 consecutive months ending on the last day of any month, except December. Alternatively, taxpayers in the U.S. may observe a 52- to 53-week fiscal year, often culminating on the nearest day to a certain date, like the nearest Saturday to Dec. 31.
Fiscal years are integral to budgeting discussions and reflect a company’s or government’s financial performance over a specified period.
Embracing IRS Requirements for Fiscal Years
The IRS default uses the calendar year, so entities that choose fiscal years might need to adjust their filing deadlines. While typical taxpayers must file by April 15 following the reported year, fiscal year taxpayers must file by the 15th day of the fourth month after their fiscal year ends. For instance, a business with a fiscal year from June 1 to May 31 must file its tax return by Sept. 15.
U.S. businesses can adopt a fiscal year for tax purposes by submitting their first income tax return reflecting that fiscal year. They may subsequently switch to a calendar year but changing from a calendar to a fiscal year requires IRS approval or compliance with Form 1128 criteria.
Inspiring Fiscal Year Examples Among Corporations
Investors often inquire, “What fiscal year is it?” as it varies by company. Public companies file 10-K reports with the SEC and may adopt unique fiscal years:
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Apple Inc. ends its fiscal year on the last Saturday of September.
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Microsoft Corporation ends its fiscal year on the last day of June.
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Macy’s Inc. ends its fiscal year on the fifth Saturday of the new calendar year, aptly coinciding post-holiday sale season.
Fiscal Year vs. Calendar Year: Understanding the Distinction
A fiscal year spans 12 months and aligns with budgeting and financial reporting practices, which are vital for accounting purposes, tax filings, and comprehensive budget plans.
Examples in Practice: The Fiscal Year in Action
The U.S. government’s fiscal year runs from Oct. 1 to Sep. 30. Technologically oriented companies often end their fiscal years in late June, reflecting their peak sales periods.
Why a Fiscal Year Might Outshine a Calendar Year
For companies reliant on seasonal activities, the fiscal year provides a strategic advantage by aligning revenues and plans. Retailers like to conclude their fiscal year post-holiday on Jan. 31, thus optimizing capital and managing financial reports outside the busiest periods.
Concluding Insights on Fiscal Years
A fiscal year serves a one-year purpose used by certain businesses, governments, and non-profits, differing from the calendar year for various strategic reasons. Utilizing fiscal years often affects tax preparation and aligns with specific financial cycles.
In unique cases, a fiscal year might end on a day like the last Saturday of a month and may even extend to 53 weeks at times. Entities must file taxes following the conclusion of their fiscal year as per related deadlines.
Related Terms: Calendar Year, Financial Year, Tax Year, Fiscal Period.
References
- Walmart. “Form 10-K”.
- Internal Revenue Service. “Tax Years”.
- Internal Revenue Service. “When to File”.
- U.S. Securities and Exchange Commission. “Apple Inc. Form 10-K”.
- Microsoft. “Microsoft Corporation Form 10-K”.
- U.S. Securities and Exchange Commission. “Macy’s Form 10-K”.
- USA.gov. “Budget of the U.S. Government”.
