A fiscal year end is the last day of the annual accounting period an entity keeps its books on. It is the date the ledgers close for the year, the date the annual financial statements are drawn to, and, where that period is also the entity’s tax year, the date the tax year is measured to.
In everyday business use the phrase covers any year end, one falling at the end of December included. Under the Internal Revenue Code the term is narrower. A fiscal year there means a period of 12 months ending on the last day of any month other than December, and a period of 12 months ending on December 31 is a calendar year (26 U.S.C. 441(d) and 441(e)). How that period behaves, including its week-based variant, is set out in fiscal year.
Fiscal Year End vs Calendar Year End
What separates them is a date, not a system of accounting. The month a year closes in does not change the basis the books are kept on, the standards applied to them or the return the client files. It changes when the year closes, and with that when the close, the statements and the filing calendar fall.
Fiscal Year End vs Year End Close
The year end is a date. The year end close is the work that brings the books to it, the cutoff, the accruals and the adjusting entries behind the statements. The date is not the firm’s to move, while the close moves whenever its capacity does, and what it involves is in the month-end close checklist.
What the Date Moves Inside a Firm
Moving the date off December moves the workload rather than the rules. The heaviest close runs after that client’s own year end, so a firm holding several non-December clients works several year-end seasons instead of one January peak.
Adopting a Year End, and Changing It Later
A new taxpayer adopts its year end by filing its first income tax return using that tax year, unless it has a required tax year (Publication 538). Changing it later is the harder question. The request goes on Form 1128 (IRS, About Form 1128), and the required-year rules that decide whether a client has a choice at all are in year-end accounts outsourcing.
An approved change splits a year in two. The return is made for a short period beginning the day after the former taxable year closed and ending the day before the new one begins (26 U.S.C. 443(a)(1)). Take a client with a December 31 year end approved to move to a June 30 fiscal year. Its short period runs from January 1 to June 30, one period of less than 12 months to close, review and file before the new cycle starts.
Common Questions
The calendar date the accounting period ends on, as against the period that ends there. The date is one day of one month, and the fiscal year is the run of months closing on it.
The fiscal year’s four quarters, counted from its own first month rather than from January and listed month by month in fiscal quarter.
September 30. The fiscal year of the Treasury begins on October 1 of each year and ends on September 30 of the following year (31 U.S.C. 1102). That federal year does not govern the year end a private client keeps its books to, and the rest of the federal picture is in fiscal year.
An LLC has no tax year rules of its own. Its tax year follows whatever it is treated as for federal tax purposes, and the required-year ladder that follows from that is in year-end accounts outsourcing.
Accountably places trained offshore accountants and tax preparers inside US CPA and EA firms, and a firm carrying several non-December year ends can put a real block of that close work through a trial task before anything client facing depends on it.
