What is the tax year?
When filing taxes, understanding the tax season and year is crucial for staying compliant and avoiding penalties. A tax year is the 12-month period in which your income, deductions and credits are recorded for tax purposes.
This period is essential because it defines the timeframe for calculating all your earnings and tax liabilities. In many countries, the tax year aligns with the calendar year, which runs from Jan. 1 to Dec. 31, but this is not always the case. Some countries and businesses may follow a fiscal year, starting and ending on different dates.
The tax year runs from Jan. 1 to Dec. 31 in the United States. Any income you earn within that period is reported in the following year’s tax return. For instance, if you earned income between Jan. 1 and Dec. 31, 2024, you would report that income in your 2025 tax return.
While the calendar year is common, some businesses and countries use a fiscal year. For example, in the UK, the tax year for individuals runs from April 6 to April 5 of the following year. Similarly, many companies might follow a fiscal year, such as April 1 to March 31.
Why tax year matters
Tax year matters because of:
- Record-keeping: For accurate tax reporting, keeping track of your earnings, deductions and credits within the defined tax year is crucial. This ensures that you report the correct amount of income and claim eligible deductions or credits.
- Consistency in accounting: Whether for personal finance or business accounting, using a defined tax year helps maintain consistency in reporting and ensures that all financial transactions are aligned with the same period, simplifying financial analysis and tax compliance.
What is the tax season?
A tax season is the official window during which individuals and businesses file their tax returns for the previous tax year. This filing period can last a few months and is dictated by local tax authorities.
In the US, tax season typically begins in late January and ends on or around April 15 (unless extensions or special rules apply). For example, if you earned income in 2024, you would file your tax return during the 2025 tax season, between late January and April 15, 2025.
If you miss this deadline, you may be subject to penalties or interest charges unless you file for an extension.
Why tax season matters
Tax season is important because of:
- Compliance deadlines: Filing your tax return within the designated season is crucial to avoid penalties or interest charges. Tax authorities often impose fines for late submissions, and the longer you delay, the more costly the penalties can become.
- Paperwork and preparation: Tax season is also a time for taxpayers to gather necessary documents such as W-2 forms, 1099s and other income or deduction records. This period allows individuals and businesses to finalize their deductions, review tax laws and ensure all paperwork is ready for filing their returns. Proper preparation during tax season can help maximize deductions and minimize taxes owed.
In the United States, the W-2 form is issued by employers to report an employee’s wages and the taxes withheld during the year, which is essential for completing individual tax returns.
On the other hand, the 1099 form is used to report various types of income other than wages, such as income from freelance work or interest earned. The 1099 is typically provided by clients or financial institutions, and both forms are crucial for accurately filing taxes during tax season. Employers and payers must send these forms to employees and contractors by Jan. 31 each year.
Key differences at a glance:
Did you know? Some businesses and individuals may choose a fiscal year that doesn’t align with the calendar year. For example, a fiscal year could run from July 1 to June 30.
Major countries’ tax years and filing windows
Some countries follow the calendar year (e.g., the US, Canada, Singapore). Others use fiscal years or different periods (e.g., the UK, India, Australia, Switzerland), with varying filing deadlines and extensions based on local regulations.
Different countries have varied start and end dates for both the tax year and tax season. Below is an overview of selected countries:
Always verify deadlines with official government websites, as dates can change due to policy updates or extraordinary circumstances.
Did you know? The IRS finalized regulations requiring brokers to report gross proceeds from digital asset sales starting in 2025 using Form 1099-DA.
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