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Accounting
Periods
When
preparing a statement of income and expenses (generally
your income tax return), you must use your books
and records for a specific interval of time called
an accounting period. The annual accounting period
for your income tax return is called a “tax year”.
You can use one of the following tax years.
w
A calendar year.
w
A fiscal tax year.
You
adopt a tax year when you file your first income
tax return. You must adopt your first tax year
by the due date (not including extension) for
filing a return for that year.
Calendar
tax year
A
calendar tax year is 12 consecutive months beginning
January 1 and ending December 31.
You
must adopt the calendar tax year if any of the
following apply.
- You
do not keep adequate records.
- You
have no annual accounting period
- Your
present tax year does not qualify as a fiscal
year
If
you filed your fist income tax return using the
calendar tax year and you later begin business
as a sole proprietor, you must continue to use
the calendar tax year unless you get IRS approval
to change it.
If
you adopt the calendar tax year, you must maintain
you books and records and report your income and
expenses for the period from January 1 through
December 31 of each year.
Fiscal
tax year
A
fiscal tax year is 12 consecutive months ending
on the last day of any month except December.
A 52-53 week tax year is a fiscal tax year that
varies from 52 to 53 weeks.
If
you adopt a fiscal tax year, you must maintain
your books and records and report your income
and expense using the same tax year.
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