NFIB

What's Your Fiscal Year?
02/ 03/ 2003

by John Rubino

When it comes to choosing a fiscal year for your business, it's best to "keep it simple," says Rhonda Abrams, a Silicon Valley based business consultant and syndicated columnist. Generally, that means operating on a January-to-December calendar year. S corporations, Limited Liability Corporations (LLCs) and most proprietorships are usually required to do so, since their accounting years must match those of their owners.

For most other businesses, "Operating on a calendar year puts you in sync with the IRS [which sends out forms and requires employee W-2s to be submitted on a calendar year basis]," says Abrams. It also matches the rhythms of most businesses. At Salem, Ohio, heating and air conditioning firm Tolson Comfort Systems, "Our busy season ends when the calendar year ends," says owner John Tolson.

But for a few companies, different fiscal years make sense. The busy season of a ski resort might run from November through February. Retailing, likewise, often overlaps two calendar years. Tri-States, a sporting goods store in Moscow, Idaho, operates on an October fiscal year, which ends with the big summer rush in outdoor gear.

To change fiscal years, it's usually necessary to file IRS Form 1128, Application to Adopt, Change or Retain a Tax Year. But look before you leap. Except in unusual cases, the IRS only allows one change per decade.

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This article originally appeared in the February/March 2003 issue of MyBusiness magazine.

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