Choosing a Tax Year

Choosing a Tax Year

Calendar vs. Fiscal

Each taxpayer must figure taxable income on the basis of an annual accounting period for keeping records and reporting income and expenses. Two choices are available:

Calendar year – runs from January 1 through December 31 and generally may be adopted by anyone. In some instances, a calendar year is required.

Fiscal year – runs for 12-consecutive months ending on the last day of any month except December.

The selected tax year must be used on your first tax return and all subsequent returns unless you get IRS approval to change. You can request a change to your tax year by filing Form 1128, Application to Adopt, Change, or Retain a Tax Year.