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What is a Tax Year?

By Matt Brady
Updated Jan 21, 2024
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The tax year, also referred to as the fiscal year or the accounting period, is the annual period after which a business or person must file taxes. The tax year differs in various countries. Some countries mirror the calendar year—January through December—and others give the fiscal year a different 12-month span. The tax year isn't usually the period in which taxpayers must file taxes, but rather the period during which taxes are calculated. For most, taxes aren't actually filed and paid until after the end of the 12-month tax period.

Businesses often file taxes and records by different systems than individual taxpayers, resulting in different-looking tax years. For example, new businesses may possibly file for something called a short tax year. This happens if the company's start-up date was somewhere in the middle of the fiscal year instead of at the beginning. Individuals, however, don't experience short tax years.

Most countries line up their tax year with the calendar year. This is the case for the majority of taxpayers in countries such as the U.S. and China. In other countries, however, tax years do not coincide with the calendar year, as in New Zealand, which has an individual fiscal year of April 1 to March 21, and Pakistan, which has a fiscal year of July 1 to June 30. Other countries set up a different tax year for corporations and governments than for individuals. In Japan, for example, individual income taxes are filed according to the calendar year, but corporations are allowed to file taxes according to their own 12-month period.

Different transactions can further cause the payment year and the tax year to line up differently. In special cases, shareholders sometimes pay taxes on gains they haven't yet received, as in the event of spillover dividends. Spillover dividends occur when a company announces that its shareholders will receive a dividend in the future for a stock they currently own. Even if that dividend won't be paid out until next year, the taxes for it are often paid during the fiscal year in which the company made its announcement.

In other cases, individuals might actually defer tax payments to later years for gains they've already received; this is common in the real estate market. Taxpayers might also delay payments on the previous year's accounting period by receiving a filing extension. A filing extension is permission from the government to pay taxes after the normal due date. Extensions often give the taxpayer another three to six months to pay.

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Discussion Comments
By sapphire12 — On Jan 04, 2011

@watson42, some people just can't get their taxes done on time. While I know some people may have fair and legitimate reasons for this, most people I have known who struggled with taxes did so mainly out of laziness. I had a friend in college, for example, whose mother was constantly applying for tax extensions; one year, it was nearly tax-time and she still had not finished filing the previous year's tax returns. This was especially unfortunate because it led to my friend having a lot of difficulty getting adequate financial aid for college. Tax dodgers often do not realize that others are affected by their actions.

By watson42 — On Jan 03, 2011

Until I was in late high school and old enough to get a job, I didn't understand that the United States tax year was the calendar year. After all, people paid taxes in April; the idea that the tax year ends months before taxes are due took me awhile to understand. However considering that long break, it is even more amazing to me how many people don't get their taxes done in time.

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