What Is a Fiscal Year? Examples Using the Federal Budget

What Is the Current Fiscal Year?

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Most businesses use a different fiscal year than the government. Photo: DAJ/Getty Images

Definition: Fiscal Year (FY) is a twelve-month period that an organization uses to report its finances. The twelve-month period 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 non-profit. The finances are the past year's revenue, costs, and profit margin. That tells the organization's management whether it has met its goals.

It is also the budget. Organizations use it to fund future operations.

A fiscal year can coincide with the calendar year, which starts January 1. In fact, most companies except for corporations must use the tax year as their fiscal year. 

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

One of the most important fiscal years for the economy is the federal fiscal year. It defines the U.S. government's budget. It runs from October 1 of the prior year through September 30 of the year being described. For example:

  • FY 2016 was from October 1, 2015, through September 30, 2016.
  • FY 2017 is from October 1, 2016, through September 30, 2017.
  • FY 2018 is from October 1, 2017, through September 30, 2018.

Why does the federal fiscal year begin on October 1?

 That allows newly-elected officials to participate in the next year's budget process. For example, the President and Congressional members elected in November 2016 will take office in January 2017. They will create the FY 2018 budget. 

Want to know more about the federal budget for each Fiscal Year?

Track the progress with these articles:

  • Fiscal Year 2017 - The President budgeted $4.073 trillion in spending  and $3.632 in revenue. That creates a $441 billion budget deficit
  • Fiscal Year 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. 
  • Fiscal Year 2015 - With revenue of $3.250 trillion, and spending of $3.688 trillion, the budget deficit was $438 billion.
  • Fiscal Year 2014 - The deficit was $485 billion, after taking in $3.021 trillion in revenue and spending $3.506 trillion.
  • Fiscal Year 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. 
  • Fiscal Year 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.
  • Fiscal Year 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 mid-term elections were over. Temporary spending orders kept the government running until April 2011.  A government shutdown was averted at the last minute when the President and Congress agreed to $80 billion in spending cuts.
  • Fiscal Year 2010 - President Obama's first budget created a $1.294 trillion deficit.
  • Fiscal Year 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.
  • Fiscal Year 2008 - This pre-recession budget focused on the War on Terror. The deficit was $459 billion.
  • Fiscal Year 2007 - The last year before the Great Recession had a deficit of only $161 billion.
  • Fiscal Year 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.

Tax Year

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, in 1913, Congress passed the law creating the income tax in February. 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 onto 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. Businesses use the fiscal year to track revenue, costs, and profit for the prior twelve months.

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?

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