The fiscal year is the annual period after which businesses or individuals must file taxes, but it differs in various countries. Shareholders may pay taxes on profits they have not yet received, and individuals can defer tax payments to later years.
The fiscal year, also known as the fiscal year or the accounting period, is the annual period after which a business or individual must file taxes. The fiscal year differs in various countries. Some countries reflect the calendar year, from January to December, and others give the fiscal year a different period of 12 months. The tax year is generally not the period in which taxpayers must file taxes, but the period during which taxes are calculated. For most, taxes are not filed and paid until after the end of the 12-month tax period.
Businesses often file taxes and records by different systems than individual taxpayers, resulting in different looking tax years. For example, new businesses can possibly apply for something called a short fiscal year. This happens if the company’s start date was somewhere in the middle of the fiscal year instead of the beginning. However, people do not experience short tax years.
Most countries align their fiscal year with the calendar year. This is the case for most taxpayers in countries like the United States and China. In other countries, however, fiscal years do not coincide with the calendar year, such as New Zealand, which has a separate fiscal year from April 1 to March 21, and Pakistan, which has a fiscal year from July 1 to June 30th. Countries set a different fiscal year for corporations and governments than for individuals. In Japan, for example, individual income taxes are filed according to the calendar year, but corporations can file taxes according to their own 12-month period.
Different transactions may cause the payment year and the fiscal year to align differently. In special cases, shareholders sometimes pay taxes on profits they have not yet received, such as in the case of indirect dividends. Indirect dividends occur when a company announces that its shareholders will receive a dividend in the future for a share they currently own. Even if that dividend won’t be paid until the next year, the taxes are often paid during the fiscal year in which the company made its announcement.
In other cases, individuals can defer tax payments to later years for earnings they have already received; This is common in the real estate market. Taxpayers can also delay payments in the prior year accounting period by receiving a filing extension. A filing extension is the government’s permission to pay taxes after the normal due date. The extensions often give the taxpayer another three to six months to pay.
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