When Is the End of the Financial Year?

A financial year, also known as a fiscal year, is a 12-month period entities use for accounting and financial reporting. It provides a framework for tracking financial data and preparing statements that assess performance and position. This consistent period allows for accurate record-keeping and meaningful comparisons over time.

Understanding Financial Year Concepts

A fiscal year is a 12-month accounting period that does not always align with the standard calendar year (January 1 to December 31). This flexibility allows organizations to choose a year-end date that suits their operational cycles or industry patterns, often based on seasonality. For example, a retail company might choose a fiscal year ending in January to capture the holiday shopping season within a single reporting period.

Aligning the fiscal year-end with a period of lower activity allows for a smoother process of closing the books, conducting inventory, and preparing financial statements without disrupting peak operations. While a fiscal year is used for accounting and financial reporting, a tax year is the annual accounting period for reporting income and expenses to tax authorities. For many, these align, but specific rules apply depending on the entity type.

Common Financial Year End Dates

For businesses in the United States, many use December 31, but there is flexibility to choose a fiscal year-end that better suits their operations. Common fiscal year-end dates include March 31, June 30, and September 30, often corresponding to quarter-ends. The federal government, for instance, operates on a fiscal year that ends on September 30. Retailers, for example, often choose January 31 to encompass the post-holiday sales period. If a business does not formally choose a different fiscal year, the Internal Revenue Service (IRS) generally assumes a calendar year-end of December 31.

Significance for Individuals

For individuals, the financial year typically concludes on December 31, marking the end of the tax year. The federal income tax return deadline for individuals is generally April 15 of the following year. Individuals can request an automatic six-month extension to file their tax return until October 15 by submitting Form 4868. However, an extension to file does not extend the time to pay any taxes owed, which are still due by the April 15 deadline to avoid penalties and interest.

Individuals can make contributions to tax-advantaged retirement accounts, such as IRAs or 401(k)s, to reduce taxable income for the current year. Contributions to IRAs and Health Savings Accounts (HSAs) for the prior tax year can often be made up until the April 15 tax deadline. Other common actions taken before December 31 to optimize an individual’s tax position include reviewing potential deductions, considering charitable contributions, and assessing capital gains or losses through tax-loss harvesting.

Significance for Businesses

The end of a business’s financial year involves specific tasks to finalize accounting records, a process known as “closing the books.” This includes reconciling accounts, ensuring accurate transaction recording, and verifying balances for accounts receivable and payable. Accurate record-keeping is foundational for preparing reliable financial statements.

After closing the books, businesses prepare year-end financial statements, including the income statement, balance sheet, and cash flow statement. These statements provide a comprehensive overview of the company’s financial performance and position, offering insights for internal decision-making and external stakeholders. Inventory counts and adjustments are also conducted to ensure accurate asset valuation.

This period is also for tax reporting and compliance, as businesses prepare corporate tax returns based on their fiscal year. Tax filing deadlines vary by business structure; for calendar-year S corporations and partnerships, returns are typically due by March 15, while C corporations usually file by April 15. For businesses operating on a fiscal year, the tax return is generally due on the 15th day of the third or fourth month after their fiscal year-end, depending on the entity type. The year-end financial review informs the budgeting and forecasting for the upcoming financial year, enabling businesses to set new goals and allocate resources.