The Tax Man Cometh

It’s that time of year again. And, again, I say don’t wait for April 2005 to make your tax plans. Now is the time to visit your accountant and tax preparer. Here is one strategy you may want to use to keep your tax bite in 2005 to a minimum: Accelerate or defer income…

… If you expect to be in a higher tax bracket next year, take in all the income that you can. If you expect to be in the same or lower tax bracket next year, defer as much income as you can. It’s been known, though not according to the rules, to receive a check in December and not cash it until January, recording the income in January. The argument could/would be made that though sent in December (and therefore deductible to the client), it was not received by the lawyer until January because of slow mail (and therefore deferred by the lawyer until the next tax year – 2006).

Categorized in: Cash Flow - Finances