Short Tax Year

As the name indicates the short tax year can be referred to a tax year that is smaller in terms of length as compared to any ordinary tax year. The short tax year can either be a fiscal year or it can be a calendar year however to be a short tax year it must be shorter than one year or less than 365 days in count. Short tax year comes when the business is started in between a passing year or it may be encountered if the method of accounting is changed by the firm or the business entity in between the running accounting year. Short tax year is a term that is specific and is only used by the corporations, business entities and organizations. This term is never used for individuals that are paying tax on their income. The short tax year is not valid for the individuals as they have to pay their taxes according to the calendar and they don’t have any option to choose fiscal year.

The example of a short tax year is a business beginning on the mid of May of a certain accounting year. Now if the business owner decides to pay the tax for that year he or she will encounter a short tax year as the length of the year from May to December is less than an ordinary calendar year. In the same way a shorter tax year will be experienced by the business if the businessman decides to choose the fiscal year that begins in a different month as compared to the month in which business was started.

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