Business, Legal & Accounting Glossary
A tax year is a 12-month period initiated by a taxable entity (individual, private company, corporation, etc.) and reported to the Internal Revenue Service (IRS). The term “tax year” is interchangeable with “accounting year.” The IRS categorized the tax year into four types:
1. Calendar year: The period from January 1st to December 31st.
2. Fiscal year: A 12-month period ending on the last day of any month except December.
3. 52-53-week tax year: A fiscal year that ends on the same day of the week in the same month each year (e.g., the last Monday in March.)
4. Short tax year: A taxable period of less than 12 months, resulting either from the taxable entity not existing for a full tax year or changing the end date of the desired tax year.
Individuals, partnerships, S-corporations and personal service corporations (PSCs) generally must use the calendar year as their tax year, unless the IRS grants permission to use a different type of tax year. Corporations may select a calendar year or a fiscal year as their tax year. The first time the corporation files taxes, its tax year is considered to be selected and locked in. After that, the tax year can only be changed with IRS permission. Requests to change a tax year can be made by filling out IRS form 1128.
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This glossary post was last updated: 5th February, 2020 | 0 Views.