It's the End of the Year...Maybe

Dec 18, 2013

Although they're not due yet, December is often the best time to start preparing what you need in order to file your taxes. Many businesses slow down in late December, so this is usually a great opportunity to get a jump on it so you don't have to rush when it's due.

However, for many businesses, your "year" doesn't end on December 31st. Your fiscal year, the 52 to 53 week period where taxes are assessed, may not be the same as the calendar year, although for many it is the same. If you don't know, check with your accountant. However, in the following cases, you're required to use the calendar year as your fiscal year:

  • You have previously filed using the calendar year and later begin business as sole proprietor, as part of a partnership, or becoming a shareholder in an S corporation. This can only change with express IRS approval.
  • Your business keeps no books or records.
  • You have no annual accounting period.
  • Your present tax year does not qualify as a fiscal year (More on this below)
  • The IRS tax code has a special provision which requires you to use the calendar year as your fiscal year.

Generally speaking, your present tax year won't qualify as a fiscal year if you've contacted the IRS to change your tax year, or you started your business during the year. Then you have what is known as a "short tax year." In a short tax year, you have to file taxes just like a regular year.

If you want to change your fiscal year, you can do so by filling out a form, about which you can find more information here. Changing your calendar year to a fiscal year can be especially useful if you have a seasonal business; if you're more active in the winter, having your financial records cut off in the middle of your business period would be crazy. Also, if you have meetings or make your budget at some other point during the year, it can be useful to have your financial records reflect that.