For most individuals, the tax year follows the calendar year—the 12 months from January 1 through December 31. Some businesses follow a fiscal tax year, which is any period of 12 consecutive months ending on the last day of any month except December.
Calendar Year
Taxes for a given calendar tax year are typically due the following April. In other words, taxes on income earned between January 1 and December 31st of 2022 are due in April of 2023. Income earned before and after 2022 will typically not affect your 2022 taxes. After the calendar year is over, you and the IRS will look at your income and expenses from the year to determine whether you owe taxes or are owed a refund. You’ll need to take into account your income, how much you’ve paid in taxes throughout the year through withholding or estimated tax payments, and any business expenses, tax deductions, or tax credits.
Types of Tax Years
Although individual taxpayers are most familiar with the calendar tax year, there are other types of tax years, like fiscal tax years, state tax years, and short tax years.
Fiscal Tax Year
A fiscal tax year can be any period of 12 consecutive months ending on the last day of any month except December. It can be 52 to 53 weeks, and does not have to end on the last day of the month. Fiscal tax years are generally only used by businesses. However, a business or sole proprietor cannot use a fiscal tax year if they do not keep books or records, or if they have no annual accounting period. Sole proprietors, business partners, or shareholders in an S corporation may adopt a fiscal tax year by filing their first tax return using that fiscal tax year. A seasonal business may choose to use a fiscal tax year to avoid splitting a busy season into two different tax years. If a sole proprietor, business partner, or shareholder in an S corporation wants to transition to filing according to a fiscal tax year after already filing a tax return in a previous year based on a calendar tax year, they will usually need to get IRS approval.
State Tax Year
States fund their civic services such as public education, construction and maintenance of highways and streets, transportation, and assistance to low-income households by collecting taxes. States follow the same system as the federal government, in that individuals usually need to file their tax returns based on the calendar year’s income and expenses. Most states also use the same April 15 filing deadline as the IRS. However, a few states have May deadlines, including Virginia and Louisiana.
Short Tax Year
A short tax year is a fiscal tax year that is less than 12 months. Short tax years usually only occur for businesses. A business may file a return for a short tax year if it has not been in business for a full fiscal year or if it changes its accounting period. A business entity is required to file a tax return even if it was not in business for an entire fiscal year. The requirements for filing are generally the same as if the business was in operation for a full fiscal tax year. The filing is made based on income as of the last day of the short tax year. A business may also use a short tax year if it’s switching from one type of tax year to another (e.g., calendar-year to fiscal-year) or changing its fiscal year dates. For example, if a company wants to change the end of its fiscal year end from June 30 to October 31, it will first need to get approval from the IRS and then it will need to file a short tax year return for that first July through October period. Some businesses use a fiscal tax year instead of a calendar tax year. A fiscal tax year starts on the first day of one month and lasts for 12 consecutive months, ending on the last day of the 12th month as long as that month is not December.
