Juggle Income and Deductible Expenditures through Year-end

John Csargo

Juggle Income and Deductible Expenditures through Year-end to Minimize Taxes:  The new tax rules allow more businesses to use the cash-method accounting for tax purposes. Assuming your business is eligible, cash-method accounting creates the ability to micromanage 2018 and 2019 taxable income to minimize taxes over the two-year period. Here are some specific cash-method moves if you expect your business income to be taxed at the same or lower rates next year.

* Before year-end, charge recurring expenses that would otherwise be paid early next year on credit cards. You can claim 2018 deductions even though the credit card bills won’t be paid until next year. However, this doesn’t apply to store revolving charge accounts. For example, you can’t deduct business expenses charged to your Home Depot account until you actually pay the bill.

* Pay expenses with checks and mail them a few days before year-end. The tax rules say you can deduct the expenses in the year you mail the checks, even though they won’t be cashed or deposited until early next year. For big-ticket expenses, send checks via registered or certified mail. That way you can prove they were mailed this year.

* Prepay some expenses for next year, but make sure the economic benefit from the prepayment doesn’t extend beyond the earlier of: (1) twelve months after the first date on which the business realizes the benefit or (2) the end of 2019 (the tax year following the year in which the payment is made). For example, this rule allows you to claim 2018 deductions for prepaying the first three months of next year’s office rent or prepaying the premium for property insurance coverage for the first half of next year.

* On the income side, the general rule for cash-basis taxpayers says you don’t have to report income until the year you receive checks in hand or through the mail. To take advantage of this rule, put off sending out some invoices so you don’t get paid until early next year. Of course, you should never do this if it raises the risk of not collecting your money.

If you have questions or want more information, please contact John Csargo at


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