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. Tax Season

    The time period between January 1 and April 15 of each year in ...
  2. Income Tax Payable

    Income tax payable is an account in the balance sheet's current ...
  3. Tax Break

    A tax break is a savings on a taxpayer's liability. A tax break ...
  4. Tax Accounting

    Accounting methods that focus on taxes rather than the appearance ...
  5. Tax Benefit

    A tax benefit is an allowable deduction on a tax return intended ...
  6. Tax Reform Act Of 1986

    A law passed by the United States Congress to simplify the income ...
Related Articles
  1. Taxes

    How Tax Cuts Stimulate the Economy

    Learn the logic behind the belief that reducing government income benefits everyone.
  2. Taxes

    How Much Tax Do You Really Pay?

    When you add direct and indirect taxes together, your real tax rate is much more than you expected.
  3. Taxes

    How the GOP Tax Bill Affects You

    Here's how the new tax bill changes the taxes you file in 2018.
  4. Insights

    A Concise History Of Changes In U.S. Tax Law

    We look at how U.S. taxes have changed since their inception.
  5. Taxes

    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.
  6. Taxes

    Why America's Taxes Are Too Low

    The solution to America's economic woes may not be in lowering taxes further, but may, in fact, lie in increasing them.
  7. Taxes

    Taxes: Who Pays And How Much?

    When it comes to taxes, the debate is endless on who pays what, especially in Congress. With no new initiatives in sight, let's take a look at who is paying now.
  8. Taxes

    Why Do So Many People Fall Behind On Their Taxes?

    Despite the threat of owing thousands of dollars to possibly the most feared organization in the U.S., millions of Americans continue to fall behind on their taxes.
  9. Taxes

    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. Taxes

    Comparing Long-Term vs. Short-Term Capital Gains Tax Rates

    Learn about the difference between short- and long-term capital gains and how the duration of your investment can impact your tax liability.
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 a state income tax and a federal income tax?

    Learn the difference between state income tax and federal income tax based on tax rates, deductions, tax credits and taxable ... Read Answer >>
Hot Definitions
  1. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  2. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  4. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  5. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  6. Monte Carlo Simulation

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
Trading Center