Fiscal Year (FY): Definition and Practical Guide What is a fiscal year? A fiscal year (FY) is any consecutive 12-month period an organization uses for accounting, budgeting, and financial reporting. Unlike the calendar year (Jan 1–Dec 31), a fiscal year can begin on any date. Organizations label a fiscal year by the year in which most of the period falls (for example, FY2025 might run Feb 1, 2025–Jan 31, 2026). Explore More Resources
Why organizations use a fiscal year Organizations choose a fiscal year to align reporting with their operational and revenue cycles. Common reasons include:
Matching financial reporting to seasonal sales (retailers often end FY after the holiday rush).
Aligning with academic cycles (many schools run July 1–June 30).
Coordinating with grant or funding schedules for nonprofits.
This alignment produces clearer year-over-year comparisons and more meaningful internal budgeting. Examples
* U.S. federal government: Oct 1–Sept 30.
* Apple: fiscal year ending in September, to group product launches and holiday sales.
* Walmart: fiscal year ending Jan 31, to include the full holiday season.
* Microsoft: July 1–June 30, aligning with enterprise and education purchasing cycles.
Fiscal year vs. calendar year — key advantages
* Flexibility: Any consecutive 12 months can be used.
* Better alignment: Reports reflect natural business cycles and seasonality.
* Improved comparisons: Year-over-year metrics are more meaningful when entire seasonal periods fall within one fiscal year.
* Operational ease: Spreads end-of-year accounting tasks away from peak business periods.
U.S. tax and filing implications Federal tax filing deadlines depend on entity type and the fiscal year end:
C corporations (Form 1120): generally due by the 15th day of the fourth month after the fiscal year ends (e.g., Apr 15 for a Dec 31 year end).
S corporations (Form 1120‑S) and partnerships (Form 1065): due by the 15th day of the third month after the fiscal year ends (e.g., Mar 15 for a Dec 31 year end).
Individuals must use the calendar year and file by the 15th day of the fourth month after year end. Explore More Resources
Some entities face restrictions:
S corporations and many personal service corporations (PSCs) generally must use a calendar year unless they can demonstrate a valid business purpose for a different tax year. Tax planning opportunities Choosing an appropriate fiscal year can offer tax management benefits:
Income deferral: Selecting a year-end before peak revenue can postpone recognition and associated tax liability.
Timing expenses: Scheduling major purchases or capital expenditures to maximize deductions in the desired tax period.
Loss harvesting: Aligning losses (inventory write-downs, disposals) to offset profits within the same fiscal year. Explore More Resources
These strategies require careful consideration of IRS rules and long-term implications. Changing a tax year Switching between calendar and fiscal years or changing an existing fiscal year requires IRS approval in many cases. Form 1128 is used to request a change in accounting period. The transition often creates a short tax year, which has special reporting and tax-calculation requirements. Plan transitions thoroughly to address financial comparisons, stakeholder communications, and system adjustments. Explore More Resources
Takeaway A fiscal year is a flexible accounting period that helps organizations match financial reporting to operational realities. The right fiscal year can improve financial clarity, simplify year-over-year analysis, and enable tax-planning opportunities, but it also introduces filing rules and potential restrictions. Choose a fiscal or calendar year based on your organization’s industry cycle, operational needs, and regulatory requirements.