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What is a taxable year?

UPDATED: December 29, 2019

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A taxable year is the 12-month time period that the IRS defines for each person’s tax season. In most cases, the taxable year is the regular calendar year, starting in January and ending in December. However, a taxable year under IRS rules does not necessarily have to be a regular calendar year. In fact, the expression “taxable year” can even be slightly deceiving when considering small business owners who actually have to pay taxes quarterly. When determining your taxable year, there are a few factors that must be considered.

Determining Your Taxable Year

The first factor to consider when determining your taxable year is whether you are employed by someone else or if you are self-employed. When employed by someone else, your taxable year is always the previous calendar year. This is because your employer is handing the quarterly taxes for you with your withholding amount. If you are self-employed, there are a few more things to review when determining your calendar year.

Independent contractors and other self-employed workers need to determine whether to use your social security number, or you will be obtaining an Employer Identification Number (EIN). If you are self-employed and using your social security number, then you most likely have a standard calendar year, because this is what the IRS defaults to for social security taxpayers.

If you obtained an EIN, check your filing document to see the month you selected for your taxable year. While most business owners will typically select the standard calendar year, those who start their business mid-year will typically use a mid-year cutoff. This information can all be found in your original EIN documentation.

Getting Help

As a general rule, regardless of the start and end month of your taxable year, you have four months at the end of it to file your annual taxes. If you are unsure how your taxable year falls or need advice on planning out your tax year, consult with your local IRS field agent or a tax attorney.

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