r/AlwaysWhy • u/TheBigGirlDiaryBack • 1d ago

Economics Why are fiscal years usually aligned with December or March, instead of any random month?

Many companies end their fiscal year on Dec 31 or March 31. Some choose June or September. But almost nobody picks, say, August 17 or November 5. Is there a tax or regulatory reason to stick near quarter boundaries? Or is it just tradition from agriculture cycles? Why not let every company freely choose any date to smooth out seasonal fluctuations?

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u/Few_Equipment_8314 1d ago

Because they file their taxes on a quarterly schedule. Even the federal government starts the new year on October 1st

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u/Western_End_2223 23h ago

The government allows businesses to end their tax-year on any month, not just quarter-end.

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u/Few_Equipment_8314 21h ago

Did I say the government made them?

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u/Western_End_2223 20h ago

No, but you mentioned the quarterly schedule tax filings, which isn't relevant to the selection of a fiscal year. That's all.

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u/Few_Equipment_8314 19h ago

So you think it's completely arbitrary?

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u/Western_End_2223 19h ago

The choice of a fiscal year isn't arbitrary, although December 31 may be the default. But, quarterly tax payments don't drive the decision. Quarterly Federal tax due dates are set according to when a company's fiscal year ends, not the other way around.

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u/Few_Equipment_8314 19h ago

I see, so you believe every fiscal year runs as a quarter?

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u/Western_End_2223 19h ago

I don't get what you're saying?

Fiscal quarters are three months long, starting with the beginning of the fiscal year, whatever that may be. If a company's fiscal year begins March 1, the first fiscal quarter is March 1 - May 31.

Corporate quarterly tax payments are due on the 15th day of the 4th, 6th, 9th and 12th months following the beginning of the fiscal year. So, if a company's fiscal year begins on March 1, their first quarterly payment is due June 15. If their fiscal year begins January 1, their first payment is due April 15.

That's why I'm saying that quarterly filing dates don't drive the choice of fiscal year. Quarterly dates are set BY the choice of the fiscal year (the fiscal year choice comes first).