Many nonprofits change their tax year from a calendar year to benefit grant tracking and donation streams, or to simplify budgeting. By aligning their fiscal year with their natural business cycle, businesses can take better advantage of tax loss harvesting strategies, particularly in industries with predictable seasonal patterns. Unlike the calendar year, which always begins on Jan. 1 and ends on Dec. 31, a fiscal year can start and end in any month. The IRS requires businesses to file their taxes on the 15th day of the third month after the end of their fiscal year.

A fiscal year is a one-year period organizations use for financial reporting difference between fiscal year and calendar year and budgeting. The organization can be a business, non-profit, or government. We use it for accounting purposes to prepare financial statements.

Armed with a BA degree in English and a knack for digital marketing, she explores her passions for literature, history, culture, and food through her engaging and informative writing. We deliver insights, tips, and strategies on starting and growing your business, helping you navigate the path to success. Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank. He holds a Master of Business Administration from Kellogg Graduate School. It makes sense to use a fiscal year that coincides with a complete business cycle for a business.

📆 Date: May 3-4, 2025🕛 Time: 8:30-11:30 AM EST📍 Venue: OnlineInstructor: Dheeraj Vaidya, CFA, FRM

Sticking with a calendar year keeps your business’s books in line with most people’s, making it a breeze to compare and evaluate. However, if your business has big ups and downs in sales at different times of the year, a fiscal year might be more your style. To find the start date of a fiscal year, add one day to the end date and then go back a full year. If the last day of a fiscal year is August 31, 2017, adding one day will take us to September 1, 2017. Going back a full year results in September 1, 2016, which is the start day of that fiscal year. While many fiscal years begin from the first of a particular month, they can also begin at other dates, such as during the middle of the month.

The primary distinction between a fiscal year and a calendar year lies in the starting and ending dates. Additionally, tax obligations and financial reporting requirements may vary based on the chosen fiscal year. Understanding these differences is essential for accurate financial planning and compliance with regulations. Companies operating on a fiscal year calendar may need to adjust their reporting and budgeting schedules to align with regulatory deadlines and industry best practices.

Small Business Trends

• These paid estimated taxes are divided into four installments.
• For example, those using the calendar year system would file by the usual April 15 deadline.
• Grants often impose restrictions on revenue that include time periods.

During that process, nonprofits are required to provide financial statements including a Form 990. Some states require that the organization provide a copy of tax-exempt status from the IRS and a formal audit report. Changing the selection of the tax year complicates the process. They wrap up the year on December 31st and hand their paperwork over to the accountant to prepare the annual informational return. The goal is to find what works best for your unique organization.

You need to file the request with the federal government generally and the IRS specifically. As with a fiscal year, a calendar year also describes a consecutive twelve-month period. However, it begins on New Year’s Day and ends on the last day of the year. For countries like the United States that follow the Gregorian calendar, this means it begins on Jan. 1 and ends on Dec. 31.

Advantages of a Fiscal Year

It is the standard calendar used worldwide for tracking dates and planning activities. While most individuals and entities use the calendar year for personal and administrative purposes, some prefer a fiscal year for financial clarity and strategic decision-making. For many businesses, aligning with the calendar year makes sense as it simplifies comparisons with industry peers and facilitates compliance with regulatory reporting requirements that follow the same timeframe. A fiscal year is a 12-month period organizations use for financial reporting and budgeting, while calendar year is a 12-month period that begins on the 1st of January and ends on the 31st of December. A fiscal year can begin on any month of the year and ends 365 later while a calendar year begins on the 1st of January and ends on the 31st of December.

A fiscal year is just fancy bookkeeping talk for a 12-month stretch that businesses and governments use to manage their cash flow. Unlike the good old calendar year (January 1 to December 31), a fiscal year can be a bit of a wild card, starting whenever it makes sense for the organization. Take the University of California, Irvine (UCI), for example. Their fiscal year kicks off on July 1 and wraps up on June 30 the next year. So, if someone talks about Fiscal Year 2025, they’re chatting about the time from July 1, 2024, right through to June 30, 2025—smack dab in the middle of two different calendar years (UCI Accounting). But you want to change your income tax return by adjusting the schedule.

• The below table shows the top 15 companies by Market Capitalization  ($ million) in the Apparel Stores sector.
• However, the auditor will be forced to present a single-year report with no comparable data available.
• A large portion of some nonprofit revenues comes from donations.

Optimized Tax Planning

On the other hand, a calendar year follows the traditional January 1 to December 31 timeline.In summary, while both a fiscal year and a calendar year span 12 months, they differ in their start and end dates. A fiscal year is tailored to meet the specific financial and operational needs of an organization, whereas a calendar year is the standard January to December period. On the other hand, the fiscal year is a 12-month period that begins on a date other than January 1st. For example, a fiscal year could begin on October 1st and end on September 30th.

Businesses using the calendar year for financial reporting will prepare their statements based on transactions taking place between these dates. The start and end dates of a fiscal year will depend on the country a company does business in. Some will naturally align with the calendar year running from Jan. 1 to Dec. 31, but many don’t. For example, the U.S. federal government uses Oct. 1 to Sept. 30 as its fiscal year, while many nonprofit organizations use July 1 to June 30. A fiscal year where we can choose any starting and ending date, but it should have 365 days in total. Generally, it helps to record the respective company’s profits, losses, taxation, etc.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

The fiscal year is useful in businesses in the establishment of consistent accounting practices and easy tax reporting. On the other hand, the calendar year is useful in normal life activities. A calendar year is the plain-old 12-month period most folks and businesses use for personal and tax matters.

Year Period

A company might opt for a fiscal year that syncs with its busiest season. If a company sees the cash roll in during the holidays, they might prefer a fiscal year ending right after the holiday rush. Think of a fiscal year as a 12-month stretch that a business uses to map out its finances. Unlike the calendar year, which runs from January 1 to December 31, a fiscal year can start at any time.

A fiscal year is a year in which business organizations/ firms/ companies/ entities prefer preparing their financial reports for the year. In a fiscal year reporting method, companies may choose to prepare their financial statements on a different twelve-month basis and not the same as the calendar year. When deciding between the calendar year and the fiscal year, there are several factors to consider. One of the most important factors to consider is tax planning. For businesses with seasonal fluctuations or complex accounting practices, a fiscal year may offer tax advantages that are not available under the calendar year. However, if your business operates on a simple accounting system, the benefits of using a fiscal year may not outweigh the added complexity.

Difference Between Fiscal Year and Calendar Year

While the fiscal year can run from any time in the year provided it has 365 days, the calendar year runs from 1st January to 31st December. Switching up your fiscal year can be a pretty big deal for your small business. Knowing what’s what when it comes to meeting requirements and how to actually get it done is key to keeping your financials running smoothly.