Short Tax Year
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Definition of 'Short Tax Year'A tax year, whether fiscal or calendar, that is less than one year in length. Short tax years occur either when a business is started or the method of accounting is changed. Short tax years occur only for businesses, never for individual taxpayers, because individuals must file on a calendar-year basis and do not have the option of choosing a fiscal year. |
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Investopedia explains 'Short Tax Year'If a business begins in the middle of May, and the business owner wishes to file on a calendar-year basis, the business will have a short tax year, with income and expenses for only 8.5 months reported on the 1040. A similar situation would occur if the business owner wished to use a fiscal year that began in a different month than that in which the business was established.A short tax year can also occur when a business desires to change its taxable year. For example, a business that reports income from June to June every year decides to change its fiscal year to begin in October. Therefore, a short tax year from June to October must be reported. |
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