The U.S. government runs on a different financial schedule than the rest of us. For the federal government, the fiscal year begins October 1 and ends September 30. We discuss why that’s the case and what significant issues are looming for the 2022 fiscal year.
What Is a Fiscal Year?
“Fiscal year” refers to a one-year period that governments and businesses use for budgeting and financial reporting. In some cases, the fiscal year matches the calendar year (January 1 to December 31). But for the federal government and many companies, the fiscal year does not align with the calendar year.
The prime example of a fiscal year that doesn’t correspond with the calendar year is the federal government’s fiscal year. The federal government operates on a budget cycle that starts on October 1 and ends on September 30. Thus, the federal fiscal year for 2022 began October 1, 2021, and ends September 30, 2022.
Why Is the Federal Fiscal Year Different?
According to The Balance website, the federal fiscal year starts October 1 to enable newly elected officials to participate in the budget process for their first year in office.
The federal fiscal year last synced up with the calendar year in 1842. If passed, legislation introduced by U.S. Rep. Michael Turner, an Ohio Republican, would once again pair the federal fiscal year with the calendar year. The bill was introduced in 2019 and was referred to the Committee on the Budget.
What Is the Fiscal Year for Taxes?
Even though the federal government is responsible for collecting federal taxes, the fiscal year for the government doesn’t overlap with the fiscal year for taxes.
The fiscal year for federal taxes paid by individuals and couples runs from January 1 through December 31. But as you’re undoubtedly aware, the annual deadline for filing tax returns is typically April 15. (The tax filing deadline was extended last year and the year prior because of the coronavirus pandemic.)
Your federal tax return for the 2021 tax year likely won’t be due until April 15, 2022. (Businesses may operate on a different tax schedule, however.)
Pressing Issues for Fiscal 2022
As of early October 2021, federal lawmakers had not yet hammered out a budget for fiscal 2022, although they have approved a stopgap measure that extends funding for the federal government until December 2021. For the time being, this avoids a shutdown of federal agencies.
The stopgap measure does not, however, resolve several major questions, such as:
- Will federal lawmakers approve raising the federal government’s debt ceiling, allowing it to borrow even more money? If the debt ceiling isn’t raised, it could trigger financial turmoil.
- Will federal legislators go along with President Biden’s plan to bump up taxes for the wealthiest Americans and U.S. corporations? The Biden Administration has proposed a $6 trillion budget for fiscal 2022.
- Will federal lawmakers endorse Biden’s hoped-for 41% hike in the budget for the U.S. Department of Education (the largest proposed increase in funding for a federal agency)?
Why Pay Attention to the Federal Fiscal Year?
While you might not need to pay attention to the federal fiscal year on a day-to-day basis, you should closely follow the federal budget crafted for each fiscal year. Why? It could affect your retirement portfolio by:
- Raising or lowering taxes. Changes to the federal tax code could lead to more or less money going into your retirement portfolio.
- Propping up (or not propping up) the financially strained Social Security system. Many American retirees rely on Social Security for a big slice of their retirement income. If there’s uncertainty about the future of Social Security, it may prompt you to make adjustments to your portfolio. For instance, you might decide to earmark more money for precious metals.
- Easing or increasing healthcare costs. Lower healthcare costs could result in more money being available for your retirement, whereas higher healthcare costs could drain your retirement resources.
- Contributing to a higher or lower national debt. As of early October 2021, the U.S. national debt was approaching $29 trillion and showed no signs of decreasing. A rising national debt—the amount of money that the federal government owes to its creditors—can chip away at stock market returns, thus potentially eating away at your retirement portfolio. That might cause some people to shift more money away from the volatile stock market and toward alternative assets like physical gold and silver.
When’s the last time you looked back on your fiscal year? It might be time for a reevaluation and rebalancing of your portfolio. Review your financial situation and call U.S. Money Reserve to learn more about diversifying with precious metals.