Short Tax Year

If you thought short tax years were maybe sorta related to leap years, sorry...they’re not for individual taxpayers.

Short tax years are for businesses. Like...the year they opened, or if they change their accounting period.

For instance, Joe’s donut shop opened in March, and they’re doing a fiscal year of March to February. Eventually, Joe decides it would be nicer if his fiscal year was aligned with the calendar year, so he has a short year for the transition, going from March to December.

This means that all of Joe’s donut expenses...all of that frosting, dough, and rent...will be accounted for and taxed from March to December on his 1040. From then on out, his costs will be taxed from January to December on a regular calendar year. The IRS is cool with this...you just gotta show your paperwork correctly. Better to ask permission first than forgiveness later when it comes to the IRS.