By Jean Murray
Before the end of every tax year, you have the opportunity to save money on taxes by timing, by taking deductions, and by spending money (if you have it, that is) on certain items. This series will help you look at these tax-saving possibilities, starting with the general concept of timing.
As you get to the end of your business tax year, you may have the option of taking income in this year or next year. If you can take income in the year of the lower profit, you may be able to minimize your taxes.
For example, if this year you will have a loss, but you know you will have a profit next year, you may want to encourage customers to pay you this year when your profits will be lower. If you think your profit will be lower next year, try to move payments from customers into next year. This is tricky, since you don't really know what will happen next year, but it is worth a discussion with your tax adviser.
When considering whether to take a deduction for an expense this year or next year, here are three points to take into account:
The principle of timing income and expense deductions, if done thoughtfully and with the assistance of your tax adviser, should lower your business taxes.