Key takeaways
- The IRS defines a fiscal year as 12 consecutive months ending on the last day of any month except December. See Publication 538.
- Sole proprietors and freelancers usually use the calendar year, because their business income goes on their personal return.
- Partnerships, S corporations and personal service corporations generally must use a required tax year unless they get IRS approval or make a special election.
- Receipts belong to the year of the expense, so a clean year-end cut-off matters whichever year you use.
What is a fiscal year?
A fiscal year is simply the 12 months a business measures itself by. Profit, taxes, budgets and reports all run on it. Some companies end their year on June 30 or September 30, often because their busy season ends then. The US federal government’s fiscal year, for example, runs from October 1 to September 30.
The IRS also allows a 52–53-week year, which always ends on the same day of the week, such as the last Saturday in January. Retailers like it because every year has the same number of weekends.
Keep a full fiscal year of receipts organized with the Manage Receipt app.
Fiscal year vs calendar year
| Calendar year | Fiscal year | |
|---|---|---|
| Dates | January 1 to December 31 | Any 12 months ending on the last day of a month other than December |
| Who usually uses it | Freelancers, sole proprietors, most small partnerships and S corporations | Seasonal businesses, many C corporations, nonprofits and governments |
| Matches your personal return | Yes | No |
| Needs IRS approval to adopt | No | Sometimes |
| Fits a seasonal cycle | Not always | Yes |
A “tax year” is just the accounting period you use on your tax return. It can be a calendar year or a fiscal year, so the two terms overlap rather than compete.
Choosing a fiscal year
For most small businesses, the choice is already made. If you file a Schedule C as a sole proprietor or single-member LLC, the business uses your personal tax year, which for nearly everyone is the calendar year. The IRS also requires a calendar year if you keep no books or have no annual accounting period.
Partnerships, S corporations and personal service corporations generally must use a “required tax year,” which usually means the calendar year. They can use a different year if they show a business purpose to the IRS or make a section 444 election on Form 8716. Regular C corporations have the most freedom to pick a fiscal year.
A fiscal year can make sense when your busy season straddles December. A ski shop that ends its year on April 30 closes its books after the season, not in the middle of it. Changing your tax year later generally requires filing Form 1128, so talk to a tax professional before you switch.
Year-end cut-off for receipts
Whatever year you use, every receipt has to land in the right one. Under the cash method, an expense generally counts in the year you pay it. Under the accrual method, it counts when you incur it, even if you pay later. See cash vs accrual accounting for the difference.
- Date every receipt by the transaction date, not the day you scan it.
- Check purchases made in the last week of the year, especially online orders and travel.
- Collect receipts for card charges that haven’t posted to your statement yet.
- Don’t move a late-December receipt into January to “use it next year.”
- Close the year in your records once your year-end closing is done, so old receipts aren’t edited by mistake.
A bakery uses a fiscal year ending June 30. A mixer bought on June 28 and paid that day belongs to the year ending June 30, 2026. Flour ordered June 29 but paid July 3 belongs to the next year under the cash method, but to the year ending June 30 under the accrual method.
Reports that follow your year, not the calendar
Manage Receipt lets you pull expense and tax reports for any date range, so a business with a July–June year can see its own fiscal year in one view. Because each receipt is saved with its transaction date, purchases near the cut-off land in the right year without manual sorting.
Explore AI Tax ReportsFrequently asked questions
Can a small business choose a fiscal year?
Sometimes. Sole proprietors and single-member LLCs normally use the owner’s tax year, which is almost always the calendar year. Partnerships and S corporations generally need IRS approval or a section 444 election to use a fiscal year. C corporations can usually pick one when they file their first return.
What is the difference between a fiscal year and a tax year?
A tax year is the annual period you use to report income to the IRS. It can be a calendar year or a fiscal year. A fiscal year is any 12-month period ending on the last day of a month other than December. So a fiscal year can be your tax year.
Does my fiscal year change when my taxes are due?
Yes. Business return due dates are counted from the end of the tax year. For example, partnership and S corporation returns are due by the 15th day of the third month after the year ends. A calendar-year business files in March; a June 30 year-end business files in September.
Which receipts belong to my fiscal year?
Receipts dated within your 12-month period belong to that year. Under the cash method, the payment date generally decides; under accrual, the date you incurred the cost does. Review purchases from the final days of the year carefully so none slip into the wrong period.