What Is a Fiscal Year (FY)?
A fiscal year (FY) is a period that a company or government uses for accounting purposes and preparing financial statements. A fiscal year may not be the same as a calendar year, and for tax purposes, the Internal Revenue Service (IRS) allows companies to be either calendar-year taxpayers or fiscal-year taxpayers. Fiscal years are commonly referred to when discussing budgets and are often a convenient period to reference when comparing a government's or a company's financial performance over time.
Understanding Fiscal Year (FY)
A fiscal year, according to the IRS, consists of 12 consecutive months ending on the last day of any month except December. For example, in terms of tax reporting, a fiscal year may run from Feb. 1 to Jan. 31. Alternatively, instead of observing a 12-month fiscal year, U.S. taxpayers may observe a 52- to 53-week fiscal year, where each year rotates between being 52 or 53 weeks long.
Fiscal Year IRS Deadlines
The default IRS system is based on the calendar year, so fiscal-year taxpayers have to make some adjustments to the deadlines for filing certain forms and making certain payments. In particular, while most taxpayers must file by April 15 following the year for which they are filing, fiscal-year taxpayers must file by the 15th day of the fourth month following the end of their fiscal year. To illustrate, a business observing a fiscal year from June 1 to May 31 must submit its tax return by Sept. 15.
Choosing Between Calendar Year and Fiscal Year
In the United States, eligible businesses can adopt a fiscal year for tax reporting purposes simply by submitting their first income tax return observing that fiscal tax year. At any time, these businesses may elect to change to a calendar year. However, businesses that want to change from a calendar year to a fiscal year must get special permission from the IRS or meet one of the criteria outlined on Form 1128, Application to Adopt, Change, or Retain a Tax Year.
Referring to a Fiscal Year
Fiscal years are referenced by their end date or end year. For example, the federal government's fiscal year begins on Oct. 1 and ends on Sept. 30. To reference these fiscal years, you may say, "the fiscal year ending Sept. 30, 2016." Similarly, if you referred to government spending that occurred on Nov. 15, 2015, you would label that as an expenditure for the 2016 fiscal year.