How do I choose my year end?


R

Richard Shephard

Excuse me if this question has been asked recently, I couldn't find it.

I'm starting out as a self-employed photographer and I'm setting up
quickbooks. I've learned that the art is in deciding exactly how much
information you're going to be giving it, so you don't waste time in the
future.

My question is: How do I choose my financial year? I presume it has
something to do with seasonal business, which mine is to some extent, since
a lot of my profit is made during the wedding season (roughly June-Sept).

Many thanks,

Richard
 
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P

Peter Saxton

Excuse me if this question has been asked recently, I couldn't find it.

I'm starting out as a self-employed photographer and I'm setting up
quickbooks. I've learned that the art is in deciding exactly how much
information you're going to be giving it, so you don't waste time in the
future.

My question is: How do I choose my financial year? I presume it has
something to do with seasonal business, which mine is to some extent, since
a lot of my profit is made during the wedding season (roughly June-Sept).

Many thanks,

Richard
Whichever year end you choose you'll still end up with the same months
each year.
 
W

Wolfgang Rochow

In some jurisdictions, in my case Canada, there are certain rules that are
set by the government (see the excerpt shown below from the the CCRA (Canada
Customs & Revenue Agency) entitled Fiscal Period.

If you have the freedom to select the fiscal year (e.g., as we do for
incorporated companies) you have various factors to consider:
1. Anyone involved in merchandising usually picks an off-season when
inventory levels are low.
2. Since filing of tax returns has to occur within a certain time-line from
the end of the fiscal period and if one requires an audit or review
engagement from an accountant, some people pick year-ends that allow them to
obtain these professional services in the "off-seasons" of accountants.
3. Although each fiscal year consists of 12 months, that does not apply to
the first year of operations. In our jurisdiction, the first fiscal year is
any period not exceeding 12 months. E.g., if you pick a fiscal year-end of
December 31 and commence your business on October 27th then you first fiscal
year will consist of 2+ months (66 days)

Whatever you do, you can't afford not to establish a quality relationship
with an accountant who can and should advise you on many aspects of your
business development and the sooner you do that the better. His/her fees is
money well spent.

Wolfgang Rochow

Fiscal period
You have to report your business income on an annual basis. For sole
proprietorships, professional corporations that are members of a
partnership, and partnerships in which at least one member is an individual,
professional corporation, or another affected partnership, your business
income is generally reported on a calendar-year basis.

If you are a sole proprietorship or in a partnership in which all the
members are individuals, you can elect to have a non-calendar year fiscal
period. To do this, use Form T1139, Reconciliation of Business Income for
Tax Purposes (revised annually) to file your election. You need to file this
form by a certain date. For more information, see the guide called
Reconciliation of Business Income for Tax Purposes.

A corporation can choose a fiscal period that ends on any date. The
corporation has to file its income tax return within six months of the end
of its fiscal period.

The rules governing fiscal periods are complicated. It's a good idea to get
familiar with them before you get into business. For more information, see
our income tax guide called Business and Professional Income.
 
J

Jim Hudspeth

Richard Shephard wrote:

My question is: How do I choose my financial year? I presume it has
something to do with seasonal business, which mine is to some extent,
since a lot of my profit is made during the wedding season (roughly
June-Sept).
Since you have not indicated otherwise I am assuming you are doing business
as yourself. Unless you have already gone to considerable effort to do
otherwise, you are by default a calendar year (Year ending 12/31) taxpayer.

While there can be some benefit to having a fiscal year other the calendar
year, it does come with a price - namely you most likely would need to be
doing business as a "C" corporation (assuming you are in the US).

Jim Hudspeth
 
S

Steve

Richard Shephard said:
Excuse me if this question has been asked recently, I couldn't find it.

I'm starting out as a self-employed photographer and I'm setting up
quickbooks. I've learned that the art is in deciding exactly how much
information you're going to be giving it, so you don't waste time in the
future.

My question is: How do I choose my financial year? I presume it has
something to do with seasonal business, which mine is to some extent, since
a lot of my profit is made during the wedding season (roughly June-Sept).

Many thanks,

Richard

there are limitations for income taxes (S-corps,etc) that encourage
calendar financial yearends so stick with that unless an accountant says
otherwise.
 
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W

Wayne Brasch

Richard Shephard said:
Excuse me if this question has been asked recently, I couldn't find it.

I'm starting out as a self-employed photographer and I'm setting up
quickbooks. I've learned that the art is in deciding exactly how much
information you're going to be giving it, so you don't waste time in the
future.

My question is: How do I choose my financial year? I presume it has
something to do with seasonal business, which mine is to some extent, since
a lot of my profit is made during the wedding season (roughly June-Sept).

Many thanks,

Richard
For the most part, unless you ask IRS for permission to do so, you, by
default, must choose a calendar-year
end (December 31).

Wayne Brasch, CPA, M. S. Taxation
 
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