What Is a Fiscal Year? Examples Using the Federal Budget
What Is the Current Fiscal Year?
Definition: A fiscal year is a 12-month period that an organization uses to report its finances. It starts at the beginning of a quarter, such as January 1, April 1, July 1 or October 1. The organization is a government, business or nonprofit. The finances are the past year's revenue, costs and profit margin. That tells the organization's management whether it met its goals. It's also the budget. Organizations use budgets to fund future operations.
A fiscal year can coincide with the calendar year, which starts January 1. Most companies must use this because it's also the tax year. The only exception is corporations.
The Meaning of Fiscal: The word "fiscal" was originally a Latin word meaning "a small rush basket," used as a purse. That became the "public purse," which became the French word fiscal, meaning "to tax."
Examples Using the Federal Government Fiscal Year
The most important fiscal year for the economy is the federal government's fiscal year. It defines the U.S. government's budget. It runs from October 1 of the budget's prior year through September 30 of the year being described. For example:
- FY 2017 was from October 1, 2016, through September 30, 2017.
- FY 2018 is from October 1, 2017, through September 30, 2018.
- FY 2019 is from October 1, 2018, through September 30, 2019.
Why does the federal fiscal year begin on October 1? That allows newly elected officials to participate in the budget process for their first year in office.
For example, President Trump and the Congressional members elected in November 2016 took office in January 2017. The Trump administration created a FY 2018 budget blueprint. It has not created a detailed budget as of May 10, 2017.
Want to know more about the federal budget for each fiscal year? Track the progress with these articles:
- FY 2018 - Total projected spending is $4.268 trillion. The revenue estimate is $3.916 trillion. That creates a $352 billion budget deficit.
- FY 2017 - President Obama's last budget is $4.073 trillion in spending and $3.632 trillion in revenue. That creates a $441 billion deficit.
- FY 2016 - Spending of $3.876 trillion was $600 billion more than $3.276 trillion in revenue. Mandated benefits cost $2.487 trillion. Congress appropriated $1.15 trillion to discretionary programs. It added $82.8 billion in emergency funding.
- FY 2015 - With revenue of $3.250 trillion, and spending of $3.688 trillion, the budget deficit was $438 billion.
- FY 2014 - The deficit was $485 billion, after taking in $3.021 trillion in revenue and spending $3.506 trillion.
- FY 2013 - This budget was never approved. Instead, the government operated with across-the-board cuts called sequestration. As a result, only $3.455 trillion was spent, lower than the $3.8 trillion estimated by the Obama administration. Revenue was $2.775 trillion, also better-than-expected. The deficit was $679 billion. Why wasn't the budget approved? Tea party Republicans refused to enact another continuing resolution unless Obamacare was defunded. The government shut down for 16 days before they agreed to keep things running until January 15, 2014. Meanwhile, another bicameral conference committee negotiated the FY 2014 budget by December 15, 2013.
- FY 2012 - The federal government received $2.450 trillion in revenue, but spent $3.537 trillion, creating a $1.087 trillion deficit. A continuing resolution allowed the government to keep running until Congress approved the budget on December 31, 2011.
- FY 2011 - The deficit for FY 2011 was $1.3 trillion, the second largest in history. Thanks to the election, the lame-duck Congress missed its September 30, 2010, deadline to agree on it. Instead, they waited until the midterm elections were over. Temporary spending orders kept the government running until April 2011. The president and Congress averted a government shutdown when they agreed to $80 billion in spending cuts.
- FY 2010 - Obama's first budget created a $1.294 trillion deficit.
- FY 2009 - President Obama added the Economic Stimulus Act to President Bush's FY 2009 budget to fight the recession. That created a record deficit of $1.413 trillion.
- FY 2008 - This pre-recession budget focused on the War on Terror. The deficit was $459 billion.
- FY 2007 - The last year before the Great Recession had a deficit of only $161 billion.
- FY 2006 - The War on Terror increased military spending to $566 billion, making it the highest budget item, even more than Social Security at $550 billion. That increased the deficit to $248 billion. For more, see Deficit by Year and Deficit by President.
The tax year is the fiscal year for all individuals and most businesses. It starts on the calendar year, January 1. Taxes aren't due until April 15, three and a half months later. That's because Congress passed the law creating the income tax in February 1913. Over the years, Congress extended the deadline, giving you more time to pay your taxes. It also gives the federal government more time to hold on to your money before issuing refunds. For more, see Why Is April 15 Tax Day?
Business Fiscal Year
Most businesses must use the same tax year as their owners. That means single proprietors, partnerships, and S corporations use the calendar year. That goes for LLCs that fall under those classifications for tax purposes. Companies use the fiscal year to track revenue, costs and profits.
C corporations file their tax returns separately from their owners. Their tax year coincides with their fiscal year. Their taxes are due three months later on the 15th. For more, see Business Tax Due Dates.
Many corporations find advantages for starting the fiscal year other than January 1. For example, some businesses might choose to start their fiscal year in April for tax purposes. They can shift income and expenses to a month outside of the fiscal year to improve their taxable income.
Businesses that are seasonal might start their fiscal year on July 1. A business that has most of its income in the fall and most of its expenses in the spring might start its fiscal year on October 1. That way, they know what their income will be for the year, and can adjust their expenses to maintain their desired profit margins.
Regardless of when their fiscal year starts, most companies report on a quarterly basis. That's critical for publicly-owned corporations. That's why, in the stock market, the beginning of each quarter is called "earnings season." For more, see How Does the Stock Market Work?