The Fiscal Year End: Important Dates and Tips for a Successful Business

# The Fiscal Year End: Important Dates and Tips for a Successful Business For small to mid-sized business owners, accountants, and financial specialists, understanding and correctly managing the fiscal year-end is fundamental to timely and accurate tax reporting. Confusion over the proper accounting year structure can lead to errors, penalties, and unnecessary stress. This detailed guide breaks down what a fiscal year-end is, how it differs from the calendar year, how businesses choose their dates, and provides practical steps for managing the financial closing process in the United States. ## Understanding Fiscal Year-End The terms fiscal year, financial year, and accounting year all refer to the 12-month period a business uses for accounting, financial statement preparation, and tax reporting. This period does not necessarily align with the calendar year. ### What Is a Fiscal Year-End? The final day of this 12 month accounting period is a fiscal year-end. It is the end of the financial books and it starts a frenzy of required end of year activities such as financial reconciliation, auditing, and tax preparation. * Fiscal Year (FY): 12 months that have been selected by a business. It usually takes place on the first day of one month and stops at the last day of the same month 12 months after. * Calendar Year: A specific fiscal year that runs from January 1 to December 31. ### Fiscal Year vs Financial Year vs Accounting Year These terms are usually used interchangeably when referring to the 12 months reporting cycle of a business in the U.S. Though it is common practice to refer to a financial year in the world (e.g., in the U.K. and Australia), a fiscal year is most frequently used in U.S. tax law and governmental reporting. ## Why Does Fiscal Year-End Matter? The time of the year in which you set your business fiscal year date affects your business and its working operations greatly and your legal liabilities. ### Impact on Tax Filings Your fiscal year-end date determines the deadline for filing your business's annual tax return (with the Internal Revenue Service, or IRS). * Businesses using the calendar year (ending December 31) have set filing dates, usually in March or April. * The businesses with non-calendar year of fiscal make the filing within 15 days of the 4th month their financial year ends. As an illustration, the deadline to file your corporate tax should be October 15 (extensible), assuming that you have a fiscal year ending on June 30. Choosing a non-calendar year can offer strategic advantages, such as filing during the non-peak tax season, allowing your accountant more time and attention. ### Importance for Small Businesses For small businesses and companies involved in the employment of freelancers or any remote employees, the compliance test is on the fiscal year-end. * It is the deadline to make sure that all the wages of the employees, Agency payments (1099s), and payroll taxes (W-2s) received during the last 12 months are properly accounted for and reported. * It gives a clear end date of the year that profitability will be evaluated, inventory will be looked at and also the strategic decisions that will be made concerning the next year. ## When Does the Fiscal Year End in the U.S.? The date of ending the fiscal year in the U.S. is solely dependent on the business type and the choice done with the IRS. ### Key Dates and Deadlines * Calendar Year: December 31 is the end date. This is the default for sole proprietorships, S corporations, and individual taxpayers. * Fiscal Year: The end date is the last day of any month other than December 31. The IRS allows businesses to choose any date, provided the year comprises 12 consecutive months. * 52/53-Week Fiscal Year: The fiscal year that is not always based on the last day of a particular month, but on the same weekday (e.g. the last Friday) as a previously set date at the end of the month. | Business Structure | Default Year-End | Tax Filing Due Date (If using Calendar Year) | | --- | --- | --- | | Sole Proprietorship | December 31 | April 15 (along with personal return) | | Partnership/Multi-Member LLC | Generally December 31 (must match majority owners' year) | March 15 | | S Corporation | Generally December 31 | March 15 | | C Corporation | Can choose any date | 15th day of the 4th month after year-end | The end of the fiscal tax year for the U.S. Federal Government is September 30. This frequently leads to confusion, but it does not impact the tax deadline for private businesses. ### What Happens if You Change Your Fiscal Year-End? A conversion between a calendar year and fiscal year can be done and a change in the date of a current fiscal year may be done but must be approved by the IRS. * Businesses must file Form 1128, Application to Adopt, Change, or Retain a Tax Year. * The business will be required to complete a short period tax return to reduce a difference between the previous year end date and the new one. The process must be addressed by a tax expert at all times. ## How Do Companies Choose Their Fiscal Year End? The decision to use non-calendar year-end of business is often a strategic move guided by the natural business cycles or by the benefits of the operations. * Natural Business Cycle: Natural business cycle is when many companies select the year-end which is the most suitable time of the year when their business operations are at their lowest level. * Example: A retail business might choose a January 31 year-end because inventory levels are low and sales activities are minimal after the holiday rush. This makes closing the books, counting inventory, and preparing reports significantly easier. * Example: A school district or educational service might choose June 30 or July 31 to align with the academic year. * Administrative Ease: It will ease the load on internal personnel and external accountants as mentioned that it may be calculated on a different date that is not during the busy tax period of January-April. * Industry Alignment: Many public companies in the same industry choose similar fiscal year-ends (e.g., tech often uses December 31) for easier benchmarking and analysis. ## Fiscal Year-End Examples * Retail: January 31 * Government: September 30 * Education: June 30 or July 31 * Tech/Finance: December 31 (Calendar Year) ## What Happens at the End of a Fiscal Year? There is a comprehensive accounting exercise at the fiscal year-end and is referred to as closing the books. This would make sure that all revenue and expenditure is properly charged to the right reporting period. * Reconcile Accounts: Comparison and matching of all the bank, credit, and vendor statements to internal records. Make sure the business balance sheet is accurate. * Finalize Payroll and Contractor Payments: Make sure all the year-end wages, commissions and bonuses are paid and accounted. Worldwide: Prepare and file both W-2 and 1099A forms with employees and independent contractors, respectively. * Inventory Count: A physical count of all inventory is to be used to identify the actual cost of goods sold (COGS) and the value of the inventory. * Adjusting Entries: Record necessary adjusting entries for accruals (expenses incurred but not yet paid), deferrals (payments made for future expenses), and depreciation. * Generate Financial Statements: Prepare the final Income Statement, Balance Sheet and Statement of Cash Flows on the 12-month period. * Tax Preparation: Prep the rest of the financial statements with the final statements and file the appropriate tax forms in the IRS within the due date. ## How to Manage Fiscal Year-End Successfully The best scenario to eliminate stress and errors at the end of a financial year is proper planning. * Automation: Use cloud-based accounting software to ensure bookkeeping is automated on a daily basis, thereby ensuring the end of year reconciliation is done quickly and least exposed to human errors. * Continuous Review: Don't wait until the last day. Have monthly or quarterly reviews of the accounts to identify and pick up misclassified transactions or incomplete data. * Early Planning for Contractors: It is better to have the W-9s of all independent contractors early as possible to enable easy helping with Form 1099s long before the deadline January 31. * Consult a Tax Advisor: Have your accountant take a meeting with you several weeks or months prior to the end of the fiscal year to see what opportunities there are to exceed tax benefits, i.e. strategic equipment acquisition (depreciation) or contributions to a retirement plan.