Fiscal Year (FY) Definition - Investopedia

What Is a Fiscal Year?

A fiscal year (FY) is a 52- or 53-week (or, alternatively, a 12-month) period that companies and governments use for taxing or accounting purposes. Fiscal years are most commonly used by entities that depend on a cycle that doesn't correspond to the calendar year.

While a fiscal year can start on Jan. 1—at the beginning of the calendar year—and end on Dec. 31—at the end of the calendar year—a fiscal year doesn't always correspond to the calendar year. Countries, companies, and organizations can start and end their fiscal years differently, depending on their financial planning and budgeting practices.

Key Takeaways

• A fiscal year is a 52- or 53-week—or, alternatively, a 12-month—period chosen by a company or government to coincide with planning, budgeting, or revenue cycles.
• A fiscal year is used for accounting purposes and for preparing annual financial statements.
• While a fiscal year can run from Jan. 1 through Dec. 30, it is often different from the calendar year.
• 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.

Understanding Fiscal Years

Countries, companies, and organizations can start and end their fiscal years differently, depending on their needs and practices. For example, the U.S. government's fiscal year begins on Oct. 1; it ends on Sept. 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.

Nonprofit organizations often align their fiscal years with the timing of grant awards. A for-profit business might choose a year that ends after it has its largest revenue intake; for example, a retailer may choose to end its fiscal year on Jan. 31.

Fiscal years are referenced by their end date or end year. For example, to reference an 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.

Fiscal years are commonly referred to when discussing budgets and are a convenient period with which to reference and review a company's or government's financial performance.

IRS Requirements for Fiscal Years

Federal tax filings are based on a company's fiscal year. The IRS defines a fiscal year as 12 consecutive months, ending on the last day of any month (except December). According to the IRS definition, a fiscal year must 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.

For reporting annual income for tax purposes, U.S. taxpayers are subject to a tax year that corresponds to the calendar year. So, the U.S. tax year runs from Jan. 1 to Dec. 31. All earnings during that period are considered income for tax purposes.

For companies and organizations with fiscal years that are different than the calendar year, some adjustments to the deadlines for filing certain forms and making payments may be necessary.

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 U.S., 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, certain business entities or S corporation shareholders that want to change from a calendar year to a fiscal year may require approval from the IRS unless they 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?" The answer to this question can vary from company to company. Below are 10-K reports from well-known companies with fiscal years that don't follow the calendar year. 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 Saturday closest to Jan. 31. Many retailers generate a large amount 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 (52 or 53 weeks) and corresponds with a company’s budgeting process and financial reporting periods. Fiscal years can differ from a calendar year and are important for accounting purposes because they are used when filing taxes, for budgeting, and for 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 technology companies experience strong sales volumes during the first half of the year, which can explain why, in many cases, their fiscal years 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 and expenses to align better. For instance, it is common for retail companies to end their fiscal year on Jan. 31, after the holiday season. This gives the company more starting capital to work with and allows it to prepare financial reports in a quieter sales period.

The Bottom Line

A fiscal year is a year-long (52- or 53-week) period chosen by a company or government to coincide with planning, budgeting, or revenue cycles. A fiscal year is used for accounting purposes and for preparing annual financial statements.

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.