The Tax Year

The taxpayer must use a tax year to figure his or her taxable income. A tax year is an annual accounting period for keeping records and reporting income and expenses. An annual accounting period does not include a short tax year.
The taxpayer can use one of the following tax years:

• A CALENDAR YEAR. A calendar year is 12 consecutive months beginning on January 1st and ending on December 31st. If the taxpayer adopts the calendar year, he or she must maintain his or her books and records and report his or her income and expenses from January 1st through December 31st of each year. If the taxpayer files his or her first tax return using the calendar tax year and he or she later begins business as a sole proprietor, becomes a partner in a partnership, or becomes a  shareholder in an S corporation, he or she must continue to use the calendar year unless he or she obtains approval from IRS to change it, or is otherwise allowed to change it without IRS approval. Generally, anyone can adopt the calendar year. However, the taxpayer must adopt the calendar year if: 
• He or she keeps no books or records;
• He or she has no annual accounting period;
• His or her present tax year does not qualify as a fiscal year;
• He or she is required to use a calendar year by a provision in the Internal Revenue Code or the Income Tax Regulations.
• A FISCAL YEAR. A fiscal year is 12 consecutive months ending on the last day of any month except December 31st. If the taxpayer is allowed to adopt a fiscal year, he or she must consistently maintain his or her books and records and report his or her income and expenses using the time period adopted.
• 52-53-WEEK TAX YEAR. The taxpayer can elect to use a 52-53-week tax year if he or she keeps his or her books and records and report his or her income and expenses on that basis. If the taxpayer makes this election, the 52-53-week tax year must always end on the same day of the week. The 52-53-week tax year must always end on:
• Whatever date this same day of the week last occurs in a calendar month;
• Whatever date this same day of the week falls that is nearest to the last day of the calendar month.
• SHORT TAX YEAR. A short tax year is a tax year of less than 12 months. A short period tax return may be required when the taxpayer:
• Is not in existence for an entire tax year;
• Change his or her accounting period.