Business, Legal & Accounting Glossary
A short tax year is any period of fewer than 12 months for which a taxable entity is required to pay taxes. A short tax year commonly occurs when a taxable entity (such as a business) has been in operation for less than one full tax year. Another common reason for a short tax year is when a taxable entity (a business or an individual) changes its accounting period by permission of the Internal Revenue Service (IRS). In either case, the taxable entity must file taxes for the short tax year under the general rule. The IRS provides for some relief (reduction in taxes) for cases in which the short tax year distorts income levels. For individuals, a short tax year can occur when the individual dies. Taxes, in this case, must be filed for the decedent in the same way a living individual would file for the short tax year.
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This glossary post was last updated: 5th February, 2020