You can help your bottom line by deferring your taxes. You can defer business taxes by controlling when your business recognizes income and deductions.
On the income side:
You can defer your income by deferring the billing for your product or service. This works if your company uses the cash method of accounting. If your business uses the accrual method, you could defer the shipping of your products or delivery of your service. This allows your business to control what time period you get taxed for on the revenue generated from these sales.
On the expense side:
You may want to accelerate deductible expenses into the current year. This will allow you to deduct them this year rather than next. Even if you paid for expenses with a credit card, you can deduct them in the year you charged them even if you don’t pay the credit card off until the following year.
However, the caveat is this: If you think you are going to be in a higher tax bracket next year you want to try the opposite. It might increase your tax bill this year but you’ll save more than that over the next few years.
Knowing your business, having accurate data and making realistic projections can help you time your transactions and financial events to position your company advantageously come tax time. This is why we always say that taxes are a year round operation, not a yearly nuisance. They are an integral business planning tool. Timing is one of the best ways to utilize that tool.
Timing impacts all business taxes differently. Talk to one of our experts today to learn some timing strategies that could improve your bottom line. You may be leaving money on the table unknowingly, by not strategically timing when you recognize income or incur expenses.