Tax Year

AAA

DEFINITION of 'Tax Year'

The period of time which is covered by a particular tax return. Many firms simply use the calendar year as their tax year, however this is not always required. When a firm begins or ends operations, it often needs to file a tax return for a shorter time period than a full 12 months. During normal operations, a firm may elect different dates for its tax year in the same way that it may elect different fiscal years. This is typically a simple operation requiring only that certain forms be completed.

BREAKING DOWN 'Tax Year'

Changing the firm's tax year generally does not have any long-term effect on tax liabilities. However, changing the tax year may allow the firm to more efficiently compile the financial information required to complete tax returns. Strategically timing a tax year may also allow for better utilization of accounting resources where preparing the tax return can be made to coincide with a less busy portion of the year.

RELATED TERMS
  1. Filing Extension

    An exemption made to both individual taxpayers and businesses ...
  2. Spillover Dividend

    A type of dividend in which the payment year and the taxable ...
  3. Calendar Year

    The one-year period that begins on January 1 and ends on December ...
  4. Accounting Period

    The time span in which certain financial events took place. The ...
  5. Netfile

    Open February to September, this service is one of the electronic ...
  6. Last Fiscal Year - LFY

    The most recent 12-month accounting period that a business uses ...
Related Articles
  1. Taxes

    3 Retirement Account Rules To Know

    Stay up-to-date on regulation amendments to avoid penalties as well as take advantage of new opportunities.
  2. Taxes

    Get A 6-Month Tax Extension

    Discover how to get some extra time from the IRS, without paying for the privilege.
  3. Taxes

    3 Common Tax Questions Answered

    We clarify some rules that often puzzle taxpayers.
  4. Economics

    The Problem With Today’s Headline Economic Data

    Headwinds have kept the U.S. growth more moderate than in the past–including leverage levels and an aging population—and the latest GDP revisions prove it.
  5. Taxes

    What's Wrong with the American Tax System

    American's are highly taxed and we still run a deficit. We explain why.
  6. Retirement

    Top Tips for Minimizing Taxes on Social Security

    Social Security benefits are taxable under certain circumstances. Here are some ways retirees can lessen the tax burden.
  7. Taxes

    Top Tips for Minimizing Taxes on Severance Pay

    A look at the top ways to lessen the tax burden on severance pay.
  8. Taxes

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  9. Taxes

    Explaining Double Taxation

    Double taxation refers to income taxes being imposed twice on the same source of earned income.
  10. Economics

    Understanding Deferred Income Tax

    Deferred income tax is a liability on a balance sheet that reflects income tax that is allocable to the current period, but has not yet been paid.
RELATED FAQS
  1. What procedure applies to a taxpayer who made excess contributions for 2001, 2002, ...

    If the IRA owner filed his/her 2004 tax return by the due date, including any extensions, he/she receives an automatic six-month ... Read Full Answer >>
  2. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  3. How do you calculate penalties on an IRA or Roth IRA early withdrawal?

    With a few exceptions, early withdrawals from traditional or Roth IRAs generally incur a tax penalty equal to 10% of the ... Read Full Answer >>
  4. Are credit card rewards taxable?

    Credit card rewards are taxable in the United States some of the time. The Internal Revenue Service (IRS) classifies credit ... Read Full Answer >>
  5. Are Social Security benefits taxable after age 62?

    Eligibility to collect Social Security benefits begins at age 62. Many seniors, to collect larger benefit amounts, wait until ... Read Full Answer >>
  6. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  2. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  3. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  4. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  5. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  6. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!