What is my tax year?
The IRS recognizes two main types of taxable or tax years—a calendar tax year and a fiscal tax year. Your business structure and cycle will help determine whether a calendar or fiscal tax year is appropriate. Calendar tax year. A calendar year is twelve consecutive months, running from January 1st and ending December 31st. Most small businesses use a calendar year as their tax year. Fiscal tax year. A fiscal tax year is twelve consecutive months ending on the final day of any month other than December (i.e. July 31st). Alternatively, a fiscal tax year may also be a 52 to 53 week tax year that does not end on the last day of a given month. Under a 52 to 53 week fiscal year, your tax year always concludes on the same day of the week when it lasts occurs in that calendar month (i.e. the last Wednesday in March) or falls nearest to the last day of that month. Once you have established your LLC’s taxable year, be aware that you must follow it in subsequent years and it can be difficult to change your taxable year in the future. However, you may be able to vary your LLC’s tax year if there is a valid business reason for the modification, such as making an adjustment for a seasonal or cyclical business. But you must f
ormally request and receive IRS approval in advance to change your tax year. The IRS wants to avoid situations in which changing your tax year may result in lost or distorted revenues.