The United States government ends each fiscal year on September 30.
A fiscal year has more to do with accounting than with the calendar. Also known as a “financial year” or “budget year,” it covers any 12-month period its creator decides. The United States government, for example, observes it from October 1 to September 30. In the UK, it runs from April 6 to April 5 of the following year.
April 5 is the end of the tax year in the UK.
If a business owner is trying to establish a fiscal year period for a new business, the type of business should be the primary consideration. A hair salon or auto repair shop, where work tends to be constant rather than seasonal, would do well to use the normal calendar year, which corresponds to the federal fiscal year. However, a retail operation expecting to hit peak traffic around Christmas wouldn’t want the end of this calendar, with the resulting confusion in accumulating tax information and preparing a budget for the coming year, to coincide with the Christmas rush.
The best time for the end of a fiscal year is when inventory and business are at their lowest. A chain of resort hotels in South Florida, for example, could open in August, while a ski resort in Vermont could stop in June. Some tax experts advise ending it on a quarterly basis, such as March 31, June 30, or September 30. That’s because many financial statements, like payroll, are released quarterly.
The IRS generally accepts any 12-month period as a taxable interval, as long as the business files a Form 1120 indicating what the parameters of its tax year will be. However, once that date has been set, it cannot be changed for IRS purposes during that calendar year. Since preparing a budget is perhaps the most important task for state and national legislatures, governments often use this time period to determine when these legislators will be in session.