What Is a Fiscal Year (FY)?
A fiscal year is a one-year period that companies and governments use for financial planning and budgeting. Fiscal years are most commonly used by entities that depend on a cycle that doesn’t correspond to the calendar year.
For example, the U.S. government’s fiscal year starts on Oct. 1 and ends on Sep. 30. It is structured this way so that the government can collect taxes, accept funding requests from its agencies, create a budget proposal, and route the proposed budget through the appropriate channels to Congress for approval.
Key Takeaways
- A fiscal year is a 12-month period chosen by a company or government to coincide with planning, budgeting, or revenue cycles.
- Financial reports, external audits, and federal tax filings are based on a company’s fiscal year.
- Fiscal years are important because they allow an entity to better prepare for its upcoming year.
Investopedia / Julie Bang
Understanding Fiscal Years
A fiscal year is a period lasting one year but not necessarily starting at the beginning of the calendar year. Countries, companies, and organizations can start and end their fiscal years differently, depending on their needs and practices.
Fiscal years that vary from a calendar year are typically chosen due to the specific nature of the business. For example, nonprofit organizations often align their fiscal years with the timing of grant awards. At the same time, a for-profit business might choose a year that ends after it traditionally has its largest revenue intake, such as a retailer ending its fiscal year on Jan. 31.
Fiscal years are referenced by their end date or end year. For example, to reference a nonprofit organization’s fiscal year, you may say, “FY 2024” or “fiscal year ending June 30, 2024.” Similarly, if you referred to government spending that occurred on Nov. 15, 2024, you would label that as an expenditure for FY 2025.
According to the IRS, a fiscal year consists of 12 consecutive months ending on the last day of any month except December. Alternatively, instead of observing a 12-month fiscal year, U.S. taxpayers may observe a 52- to 53-week fiscal year. In this case, the fiscal year would end on the same day of the week each year, whichever is the closest to a certain date–such as the nearest Saturday to Dec. 31. This system automatically results in some 52-week fiscal years and some 53-week fiscal years.
Fiscal years are commonly referred to when discussing budgets and are a convenient period to reference and review a company’s or government’s financial performance.
IRS Requirements for Fiscal Years
The default IRS system is based on the calendar year, so fiscal-year taxpayers have to make some adjustments to the deadlines for filing certain forms and making payments. While most taxpayers must file by April 15 following the year for which they are filing, fiscal-year taxpayers must file by the 15th day of the fourth month following the end of their fiscal year. For example, a business observing a fiscal year from June 1 to May 31 must submit its tax return by Sept. 15.
In the United States, eligible businesses can adopt a fiscal year for tax reporting purposes simply by submitting their first income tax return observing that fiscal year. At any time, these businesses may elect to change to a calendar year. However, companies that want to change from a calendar year to a fiscal year must get special permission from the IRS or meet one of the criteria outlined on Form 1128, Application to Adopt, Change, or Retain a Tax Year.
Examples of Fiscal Years for Corporations
Investors might ask, “What fiscal year is it?” and it can vary from company to company. Below are 10-K reports from popular companies with fiscal years that don’t follow the calendar. A 10-K is an annual financial performance report filed by publicly traded companies with the Securities and Exchange Commission (SEC).
Apple Inc. (AAPL) ends its fiscal year on the last Saturday of September.
Microsoft Corporation (MSFT) ends its fiscal year on the last day of June every year.
Macy’s Inc. (M) ends its fiscal year on the fifth Saturday of the new calendar year. Many retailers generate a large chunk of their earnings around the holidays, which could explain why Macy’s chooses this end date.
Is a Fiscal Year the Same As a Calendar Year?
A fiscal year spans 12 months and corresponds with a company’s budgeting process and financial reporting periods. Fiscal years can differ from a calendar year and are an important concern for accounting purposes because they are involved in federal tax filings, budgeting, and financial reporting requirements.
What Is an Example of a Fiscal Year?
The U.S. government’s fiscal year begins on Oct. 1 and ends on Sept. 30. Companies that rely on contracts from the government also may structure their fiscal years to end in late September. Conversely, many tech companies experience strong sales volumes during the first half of the year, which can explain why, in many cases, their fiscal years will end in late June.
Why Use a Fiscal Year Instead of a Calendar Year?
For companies that rely on seasonal activity, using a fiscal year may be beneficial. This is because it allows revenues, expenses, and plans to align better. For instance, it is common for retail companies to end their fiscal year on Jan. 31, after the holiday season has ended. This ends the year on a high note, gives the company more starting capital to work with, and keeps it from trying to prepare financial reports during its busiest sales period.
The Bottom Line
A fiscal year is a one-year period used by some businesses, governments, and nonprofits that ends on a date other than Dec. 31. Reasons vary for why some entities might want a fiscal year different than the calendar year.
In certain circumstances, a fiscal year might end on a specified day—such as the last Saturday of a particular month—as opposed to the last day of a month. In these cases, it is possible for a fiscal year to sometimes be 53 weeks long. Entities that use a fiscal year file their taxes on the 15th day of the fourth month following the conclusion of their fiscal year.
