You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. A tax year is usually 12 consecutive months. There are two kinds of tax years.
- Calendar tax year. This is a period of 12 consecutive months beginning January 1 and ending December 31.
- Fiscal tax year. This is a period of 12 consecutive months ending on the last day of any month except December. A 52- or 53-week period is a fiscal year ending on a specific day of the week that occurs in a particular month or occurs nearest to the last day of a specific month.
If you operate a business as a sole proprietor, the tax year for your business must be the same as your individual tax year. Special rules apply to S corporations and partnerships.
For more information, see Publication 538, Accounting Periods and Methods.
First-time filer. If you have never filed an income tax return, you can choose either a calendar tax year or a fiscal tax year. You must choose a tax year by the due date, not including extensions, for filing your first return.
You must use a calendar tax year if you have inadequate records or you have no annual accounting period, or your annual accounting period does not qualify as a fiscal year.
Changing your tax year. Once you have chosen your tax year, you may have to get IRS approval to change it. To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. You may have to pay a fee. For more information, see Publication 538.