When Does the Financial Year End in the United States?

A financial year, often called a fiscal year, represents a 12-month accounting period that organizations and individuals use for financial reporting and tax obligations. This standardized timeframe allows for consistent tracking of revenues, expenses, and overall financial performance. While many assume this period aligns with the traditional calendar year, its start and end dates can vary significantly.

Common Financial Year Ends

For most individual taxpayers in the United States, the financial year aligns with the calendar year, concluding on December 31st. The U.S. federal government operates on a different schedule, with its fiscal year ending on September 30th.

Many businesses also adopt a December 31st financial year-end. However, numerous companies choose alternative year-ends that often align with their operational cycles. Common non-calendar year-ends include June 30th, March 31st, or September 30th.

For instance, retail businesses might end their fiscal year in January to capture the full holiday sales season within one reporting period. Similarly, educational institutions frequently use a June 30th year-end to match their academic calendars. This flexibility allows businesses to align their financial reporting with periods of naturally lower activity, simplifying year-end processes.

Choosing a Financial Year

While some entities have a specific financial year mandated by law, many businesses can choose their fiscal year. A primary factor influencing this decision is the natural business cycle. Aligning the year-end with the lowest point of business activity, such as after peak sales or during inventory drawdown, can streamline financial closing procedures and inventory counts.

Industry practice also plays a role, as some sectors commonly adopt specific fiscal year ends for consistency and comparative analysis. Businesses might choose a year-end that matches that of their parent company or major clients for administrative convenience. Once a fiscal year is chosen, changing it generally requires approval from the Internal Revenue Service (IRS). This process ensures stability in financial reporting and tax compliance.

Impact of the Financial Year End

The conclusion of a financial year triggers key activities for businesses and individuals. Financial reporting is a primary task, involving the preparation of annual financial statements, including the Income Statement, Balance Sheet, and Cash Flow Statement. These documents summarize a business’s performance and financial position over the preceding 12 months.

Tax preparation and filing are also directly influenced by the financial year end, as this date determines when annual tax returns must be prepared and submitted. For larger organizations or those with specific regulatory requirements, the year end often necessitates an external audit. Independent auditors review financial records to verify accuracy and compliance with accounting standards.

The closing of one financial year provides an important opportunity for reviewing performance against prior budgets and developing financial plans for the upcoming period. Companies utilize year-end results to evaluate overall performance, make strategic adjustments, and determine matters such as employee bonuses or dividend distributions.