Tax Year

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. Effective Tax Rate

    The average rate at which an individual or corporation is taxed. ...
  2. Tax Return

    1. The tax form or forms used to file income taxes with the Internal ...
  3. Direct Tax

    A tax that is paid directly by an individual or organization ...
  4. Tax Season

    The time period between January 1 and April 15 of each year in ...
  5. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  6. Tax Base

    The assessed value of a set of assets, investments or income ...
Related Articles
  1. Personal Finance

    Explaining Tax Returns

    A tax return is the form or forms used to file income taxes with the IRS.
  2. Personal Finance

    Use Tax Vs. Internet Sales Tax: How Are They Different?

    Learn about the differences between a use tax and an Internet sales tax. Find out about transactions in which the taxes apply, and to whom they apply.
  3. Investing

    Calculating Net of Tax

    Net of tax is a figure that has been adjusted for taxes.
  4. Personal Finance

    Understanding Taxes

    Taxes are mandatory fees that individuals and corporations must pay to their governments.
  5. Investing

    Deferred Tax Liability

    Deferred tax liability is a tax that has been assessed or is due for the current period, but has not yet been paid. The deferral arises because of timing differences between the accrual of the ...
  6. Personal Finance

    5 Most Taxing Taxes for Americans

    There’s not much that unites Americans like their hatred of taxes. Here's a list of taxes we dislike the most.
  7. Personal Finance

    Tax Haven Vs. Tax Shelters: Is There a Difference?

    Learn about the difference between tax havens and tax shelters, and how both are used to reduce tax liability or avoid paying taxes altogether.
  8. Personal Finance

    3 Federal Income Tax Facts You Didn't Know

    Learn about three federal income tax facts that most Americans may not know from one of the most trusted financial resources on the Web.
  9. Personal Finance

    Confused About Estimated Tax Deadlines for 2016?

    If you run a business or have investment income, pay attention to this year's estimated tax deadlines. Here are the details, and what's new for 2016.
  10. Personal Finance

    5 States Without Sales Tax

    Learn about the five states that do not charge sales taxes and about other taxes the states levy instead in order to generate revenue.
RELATED FAQS
  1. Do I need to file an income tax return every year?

    Understand if a person needs to file a tax return every year. Learn the benefits of filing a yearly income tax return even ... Read Answer >>
  2. What is the difference between federal and state withholding tax?

    Discover whether you can file your taxes by yourself. The three main options for tax preparation are a tax professional, ... Read Answer >>
  3. What is the difference between income tax and capital gains tax?

    The conceptual difference between income tax and capital gains tax is that income tax is the tax paid on income earned from ... Read Answer >>
  4. What's the difference between the marginal tax rate system and a flat tax?

    Find out about the difference between marginal tax rates and flat taxes. Gain insights on both systems and the arguments ... Read Answer >>
  5. How does the marginal tax rate system work?

    The marginal tax rate is the rate of tax that income earners incur on each additional dollar of income. As the marginal tax ... Read Answer >>
  6. What are the differences between regressive, proportional and progressive taxes?

    Understand the differences between the most common tax systems including regressive taxes, proportional taxes and progressive ... Read Answer >>
Trading Center