The fiscal year typically refers to a 12-month period through which businesses manage their financial reporting cycle, tax filings, shareholder reports, and external audits. The fiscal year-end marks the end of this 12-month period, bringing the financial year to an end.
While for most businesses, the fiscal year is the same as the calendar year, i.e., from January 1st till December 31st, this isn’t always the case. Canadian businesses also have the option to choose a different fiscal year period that starts and ends on different dates than the aforementioned ones. For instance, a fiscal year may begin from May 1st and extend all the way till April 30th. For businesses in their first year, the fiscal year may even be shorter than the 12-month period. At the end of each fiscal year, businesses report on their debt, profits, budgetary deficits, revenues, and other financial statements.
So, do you want to choose your year-end date? Here’s what you need to do.
Why Choose a Fiscal Year That Doesn't End in December?
Since the calendar year is the most popular fiscal year in Canada (as well as globally), accounting firms are typically the busiest during the weeks/months following December 31st. Having a different fiscal year-end date can help your business receive thorough and undivided accounting services, and often at a lower cost as well.
Moreover, seasonal businesses are advised to choose a fiscal year-end date that doesn’t fall in the busy accounting season. If yours is a seasonal business, having a different year-end date can help you avail more efficient accounting services.
Deciding On a Date
Corporations are required to select a fiscal year-end date for their business within the 53 weeks that follow their incorporation date. Once the first ever corporate tax has been filed, the year-end date chosen by them will come in play.
For sole proprietorships and partnerships, CRA approval is required if you want the year-end date to be different than December 31st. You’ll have to fill out Form T1139 to make the request. However, CRA approval isn’t guaranteed.