Time business income and deductions for tax savings
If you conduct your business using a pass-through entity — meaning a sole proprietorship, S corporation, LLC, or partnership — your shares of the business’s income and deductions are passed through to you and taxed at your personal rates.
The traditional strategy of deferring income into next year while accelerating deductible expenditures into this year makes sense if you expect to be in the same or lower tax bracket as previous year.
On the other hand, if you expect to be in a higher tax bracket next year, take the opposite approach. Accelerate income into this year (if possible) and postpone deductible expenditures until next year. That way, more income will be taxed at this year’s lower rate instead of next year’s higher rate.
If you have higher Net income accelerate deductible expenditures: Computers, printers, ink, car, etc
If you have cash on hand and high taxable income ….The general rule for cash-basis businesses is that you don’t have to report income until the year you receive cash or checks in hand or through the mail. To take advantage of this rule, consider waiting until 12/31/2020 to send out some invoices to customers. That will defer some income until next year, because you won’t collect the money until early next year. Needless to say, this idea should only be used for customers with solid payment histories