Image courtesy of Pixabay.com

Image courtesy of Pixabay.com

A “fiscal year” refers to the 12-month period on which an organization keeps its books.

For the vast majority of main-street small businesses, their fiscal year is the calendar year. Meaning, a year for tax and bookkeeping purposes starts on January 1 and ends on December 31. This is common even among much larger companies — in fact, according to Wikipedia, 65% of publicly traded companies use the calendar year as their fiscal year.

C-corporations are free to use any fiscal year they like. For example, a C-corp could choose to have their fiscal year run from July 1 to June 30. Other entities must show a business purpose to having a fiscal year other than the calendar year. (A further discussion of that topic is beyond the scope of this article.)

The federal government uses a fiscal year beginning on October 1 and ending on September 30. The fiscal year for the State of Iowa starts July 1 and ends June 30.

For more tax and accounting terms, check out the Glossary page on this website.