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Tax Year: A Comprehensive Guide to Its Legal Definition and Implications
Definition & Meaning
A tax year, also known as a taxable year, refers to the period for which a taxpayer reports their income and calculates their tax liability. This period can either align with the calendar year, running from January 1 to December 31, or it can be a fiscal year, which is a 12-month period ending on the last day of any month except December. Most taxpayers choose to use the calendar year unless they have received approval from the Internal Revenue Service (IRS) to adopt a different accounting basis.
Table of content
Legal Use & context
The term "tax year" is primarily used in the context of federal and state taxation. It is relevant in various legal areas, including tax law and accounting. Taxpayers must adhere to specific regulations when determining their tax year, as it affects the timing of income reporting and tax payments. Users can manage their tax filings through forms provided by services like US Legal Forms, which offer templates for various tax-related documents.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A small business operates on a fiscal year that runs from July 1 to June 30. They must report their income and expenses according to this period when filing their taxes.
Example 2: An individual taxpayer who earns income from freelance work chooses to file their taxes based on the calendar year, reporting all income earned from January 1 to December 31. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Tax Year Options
California
Allows both calendar and fiscal years with IRS approval.
New York
Primarily uses the calendar year but allows fiscal years for certain businesses.
Texas
Taxpayers can choose either a calendar or fiscal year without additional state restrictions.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Common misunderstandings
What to do if this term applies to you
If you need to determine your tax year, first decide whether a calendar year or fiscal year best suits your situation. If you wish to change your tax year, ensure you obtain the necessary approval from the IRS. For assistance with tax forms, consider exploring the ready-to-use templates available at US Legal Forms. If your tax situation is complex, consulting a tax professional may be beneficial.
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