Daniel HonanFounder, Profitable Painter CPA PLLC · I help painting contractors increase profits & cash flow while reducing taxes♦ Bookkeeping ♦ Tax

Painting Biz Owner: Unlock the Power of Income Deferment for Cash-Basis Taxpayers! #SmallBusinessTax

Name: Painting Biz Owner: Unlock the Power of Income Deferment for Cash-Basis Taxpayers! #SmallBusinessTax
Uploaded: 2024-11-06T14:15:00+00:00
Duration: 55 s
Channel: Daniel Honan
Description: In this instructional segment, the presenter explains an income‑deferment technique tailored for cash‑basis small‑business owners, such as painting…

6 Nov 2024 · 1 min

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In this instructional segment, the presenter explains an income‑deferment technique tailored for cash‑basis small‑business owners, such as painting contractors. The method involves completing work in the current tax year (2024) but postponing the collection of payment until January 1, 2025. Because cash‑basis taxpayers only recognize income when cash is actually received, delaying the billing pushes the taxable event into the next year, effectively extending the tax‑deferral period by one year. The speaker notes that this approach runs counter to the usual advice of taking large deposits up front, and emphasizes that both income deferment and expense acceleration are strategies that only apply to cash‑basis filers.

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With income deferment, you are trying to recognize income more slowly. In this situation, you are going to sell work and you're going to perform that work in 2024, but you're not going to collect the income from that until January 1st, 2025. This does kind of go against some of the traditional wisdom, things that we have even talked about, taking as large of a deposit as possible. In this case, you're actually trying to not take money until January 1st. Reason you would do that is because if you are a cash basis taxpayer— so I do want to emphasize that this and expense acceleration are for cash basis taxpayers— you do not have to pay the taxes on the money until the year you receive it. So if we can push off collecting the billing on that until 2025, we don't have to worry about the taxes on that for an additional year.