Timing business income and expenses to your tax advantage.
Typically, it’s better to defer tax. Here are two timing strategies that can help businesses do this:
- Defer income to next year. If your business uses the cash method of accounting, you can defer billing for your products or services. Or, if you use the accrual method, you can delay shipping products or delivering services.
- Accelerate deductible expenses into the current year. If you’re a cash-basis taxpayer, you may make a state estimated tax payment before Dec. 31, so you can deduct it this year rather than next. Both cash- and accrual-basis taxpayers can charge expenses on a credit card and deduct them in the year charged, regardless of when the credit card bill is paid.
But if you think you’ll be in a higher tax bracket next year, consider taking the opposite approach by accelerating income and deferring deductible expenses. This will increase your tax bill this year but can save you tax over the two-year period.
These are only some of the nuances to consider. Please contact us to discuss what timing strategies will work to your tax advantage, based on your specific situation.
If you have questions about timing business income and expenses or would like assistance in determining how to make the most of your timing, Ciuni & Panichi can help you start planning now. For more information, or on tax reporting requirements, please contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com.
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