Fiscal Year: What It Is and Advantages Over Calendar Year

Reliable appointment setting for financial services can help streamline client scheduling and improve workflow. A calendar year is a 12-month period that begins on the 1st of January and ends on the 31st of December. It is the international standard used in most parts of the world to organize social, religious, business, personal, and administrative events. Each year has 12 months; each month has 4 weeks while each week has 7 days.

For U.S. taxpayers, any money made from January 1 through December 31 counts for that year’s taxes. This straightforward setup can make life easier for small business owners when tax season comes around. Tax filers who use a fiscal year must send their tax returns on the 15th day of the fourth month following the conclusion of their fiscal year. If, for example, your fiscal year ended on June 30, your tax filing deadline is October 15. Jo-Anne Williams Barnes, is a Certified Public Accountant (CPA) and Chartered Global Management Accountant (CGMA) holding a Master’s of Science in Accounting (MSA) and a Master’s in Business Administration (MBA). Jo-Anne is a certified Sage Intacct Accounting and Implementation Specialist, a certified QuickBooks ProAdvisor, an AICPA Not-for-Profit Certificate II holder, and Standard for Excellence Licensed Consultant.

A fiscal year difference between fiscal year and calendar year is a one-year period organizations use for financial reporting and budgeting. The organization can be a business, non-profit, or government. We use it for accounting purposes to prepare financial statements.

Financial Planning Advantages

This helps in the establishment of consistent accounting practices and easy tax reporting. Before setting the fiscal period, companies may consider financial reporting deadlines, tax season or even business statistics. A fiscal year is a 12-month period that a company or organization uses for financial reporting and planning purposes. Unlike the calendar year, which always starts on January 1st and ends on December 31st, a fiscal year can begin on any date chosen by the entity.

A fiscal year is just fancy bookkeeping talk for a 12-month stretch that businesses and governments use to manage their cash flow. Unlike the good old calendar year (January 1 to December 31), a fiscal year can be a bit of a wild card, starting whenever it makes sense for the organization. Take the University of California, Irvine (UCI), for example. Their fiscal year kicks off on July 1 and wraps up on June 30 the next year. So, if someone talks about Fiscal Year 2025, they’re chatting about the time from July 1, 2024, right through to June 30, 2025—smack dab in the middle of two different calendar years (UCI Accounting). But you want to change your income tax return by adjusting the schedule.

Key Differences

• Some follow the calendar year, while New Oriental Education has 31st May as year-end.
• The fiscal year for the federal government in the United States begins on Oct 1 and ends on September 30, which is the last day.
• Individuals who file using the calendar year must continue to do so even if they begin operating a business, sole proprietorship, or become an S corporation shareholder.
• Skip the IRS paperwork if you’re jumping back to a calendar year.
• When deciding between the calendar year and the fiscal year, there are several factors to consider.

A fiscal year typically starts at the beginning of a quarter, such as the 1st of January, the 1st of April, the 1st of July, or the 1st of October. For instance, if the year begins on the 1st of April, it will end on the 31st of March next year. Picking a fiscal year instead of a calendar year shakes up how you report what you earn and spend.

A fiscal year is a 12-month period the organizations use for financial reporting and budgeting, while calendar year is a 12-month period that begins on the 1st of January and ends on the 31st of December. The calendar year is the most commonly used fiscal year and is the period from January 1st to December 31st. This fiscal year is used by many businesses in the United States. One of the benefits of using the calendar year is that it is easy to track and align with tax season. Additionally, it is often the preferred fiscal year for businesses with simple accounting processes, as it is straightforward and easy to understand.

Optimized Tax Planning

A fiscal year lumps everything—income and expenses—into one tidy tax return. It’s like tidying your room; everything’s in one place, making it easier to see your financial situation clearly. On the flip side, going with a calendar year means slicing and dicing your financial info into two chunks, which can muddle things up a bit (GoCardless). Choosing a fiscal year for your business ain’t just a box-ticking exercise—it’s a money-making move that could be a real game-changer in terms of financial foresight and tax chops. So, here’s what you need to weigh up, plus some steps for figuring out your best-fit fiscal year.

Things to Consider When Choosing Your Nonprofit’s Year-End

• You might just have the chance to pick a fiscal year for your taxes if you check certain boxes.
• The calendar year also helps to calculate or compare two companies’ finances.
• Failing to take the differences between a fiscal and a calendar year into account can therefore result in accounting mistakes.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Before you can switch to a fiscal year, you must first obtain IRS approval . At JFW Accounting Services, we specialize in helping nonprofit organizations operate as efficiently as possible. Please contact us today if you have questions about your organization’s tax year or how to make the change.

The fiscal year is useful in businesses in the establishment of consistent accounting practices and easy tax reporting. On the other hand, the calendar year is useful in normal life activities. A calendar year is the plain-old 12-month period most folks and businesses use for personal and tax matters.

You need to file the request with the federal government generally and the IRS specifically. As with a fiscal year, a calendar year also describes a consecutive twelve-month period. However, it begins on New Year’s Day and ends on the last day of the year. For countries like the United States that follow the Gregorian calendar, this means it begins on Jan. 1 and ends on Dec. 31.

Armed with a BA degree in English and a knack for digital marketing, she explores her passions for literature, history, culture, and food through her engaging and informative writing. We deliver insights, tips, and strategies on starting and growing your business, helping you navigate the path to success. Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank. He holds a Master of Business Administration from Kellogg Graduate School. It makes sense to use a fiscal year that coincides with a complete business cycle for a business.

Seasonal businesses often benefit from using a fiscal year that gives wider flexibility to tax reporting and liability. Yet for subscription businesses with steady revenue throughout the year, a calendar year might be the better option. The similarity between these years is that these last for 365 days or twelve consecutive months. The calendar year begins on the first of January and ends on 31st December every year, while the fiscal year can begin on any day of the year but will end on exactly the 365th day of that year. Both these years have a total period of twelve consecutive months. Financial professionals, especially those managing clients with different fiscal year structures, need efficient ways to coordinate meetings and stay organized.

This flexibility allows businesses to align their financial cycles with operational needs or industry norms. For example, a retail company might choose a fiscal year that starts in February to better capture post-holiday sales trends and align budgeting with inventory replenishment cycles. Whether you’re preparing financial statements or filing taxes, it’s important to understand the difference between a fiscal year and a calendar year. While both periods last for 365 days or twelve months, the start and end dates will vary.

It is the standard calendar used worldwide for tracking dates and planning activities. While most individuals and entities use the calendar year for personal and administrative purposes, some prefer a fiscal year for financial clarity and strategic decision-making. For many businesses, aligning with the calendar year makes sense as it simplifies comparisons with industry peers and facilitates compliance with regulatory reporting requirements that follow the same timeframe. A fiscal year is a 12-month period organizations use for financial reporting and budgeting, while calendar year is a 12-month period that begins on the 1st of January and ends on the 31st of December. A fiscal year can begin on any month of the year and ends 365 later while a calendar year begins on the 1st of January and ends on the 31st of December.

For example, the Gregorian calendar was adopted in India nationwide when the British colonized the country. On the other hand, not all fiscal years use the same last day. Implementing a fiscal year can increase your business’s visibility to your accountant. Tax preparation firms are typically busiest from January to April.