Fiscal Year

Fiscal years, which are one-year periods, are used by businesses and governments for financial reporting and budgeting. A fiscal year is the most common accounting period used to generate financial statements. Despite the fact that they can begin on January 1 and end on December 31, not all fiscal years coincide with the calendar year. Universities, for example, usually begin and end their fiscal years in accordance with the academic year.

Understanding Fiscal Year (Fy)

A fiscal year is a span of time that lasts for a full calendar year but does not always begin on January 1. Governments, firms, and organizations can start and end their fiscal years differently, depending on their accounting and external audit standards.

Understanding a company's fiscal year is vital to firms and their investors since it helps them to precisely analyze sales and earnings year-over-year. The Internal Revenue Service (IRS) permits businesses to file taxes for either the calendar year or the fiscal year.

Example Of A Fiscal Year

The fiscal year of the U.S. federal government is from October 1 to September 30. Several charitable organizations have a fiscal year that spans from July 1 to June 30. Due to the unique characteristics of the business, fiscal years that differ from a calendar year are frequently used. For instance, charitable organizations usually time the start of their fiscal year with the start of grant awards.

Fiscal years are identified by either their end year or end date. For instance, you might use "FY 2020" or "fiscal year ending June 30, 2020" to refer to a charitable organization's fiscal year. The same would apply if you were to refer to government spending that took place on November 15, 2019, and you would categorize it as an expenditure for the fiscal year 2020.

Importance Of Using Fiscal Year

Using a fiscal year may be advantageous for businesses that run on a seasonal basis. This is due to the possibility that it may present a more accurate depiction of the business's activities, enabling revenues and costs to better align. For instance, it is typical for retail businesses to complete their fiscal year on January 31 following the conclusion of the holiday shopping season. Two prime examples of businesses that make use of this fiscal year are Walmart and Target.

IRS Requirements For Fiscal Years

Fiscal-year taxpayers must make some adjustments to the deadlines for submitting specific forms and making payments because the IRS's standard system is calendar-based. Fiscal-year taxpayers must file by the 15th day of the fourth month after the end of their fiscal year, as opposed to the majority of taxpayers who must do so by April 15 of the year for which they are filing.

For instance, a company with a fiscal year that runs from June 1 to May 31 must file its tax return by September 15th.

In the United States, qualifying firms can adopt a fiscal year for tax reporting purposes merely by completing their first income tax return within that fiscal tax year. These companies have the option to switch to the calendar year at any time. Companies who want to go from a calendar year to a fiscal year, however, must obtain special IRS approval or satisfy one of the requirements listed on Form 1128, Application to Adopt, Modify, or Maintain a Tax Year.

Conclusion

A fiscal year is a twelve-month term used by a firm to report its financial statistics.

The fiscal year of an organization serves as the basis for financial reports, external audits, and federal tax filings.

Depending on the specifics of their industry and revenue cycle, businesses may decide to publish their financial data using a non-calendar fiscal year.