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12/10/2015

Income Deferment

“On the first day of Christmas, my true love gave to me…,” a lower tax bill.
“All I want for Christmas is my…,” tax bill lower.
“I’m dreaming of a…,” low tax Christmas.

You might not verbally express it, but we know what the perfect holiday gift could be. Honestly, who wouldn’t want to pay less in taxes, or receive an even bigger tax refund? The possibility is more tangible than you think, and it doesn’t involve giving away your possessions as deductible contributions. But you have to be a little bit open-minded. If you read the title carefully, you might not be too eager to participate, but doing so could prove to be worth the effort.

Basic Tax 101: The amount of tax that you pay back is dependent on your taxable income. The main goal is to lower your taxable income, which leads to a low tax bill. Typically, people use standard or itemized deductions to shrink their amount of taxable income.

Another way to lower your taxable income is to just make less money. *gasp*

Now before you click that little “x” on the top-right of your browser, let’s humor the idea for minute; it’s a bit more common than you think. We don’t mean for you to take a paycut or just quit work entirely. The idea is to delay your income when you anticipate a large tax bill into the next year when your income is little less.

Self-Employment: It’s not as difficult as it may sound. Let’s say you’re self-employed and you just completed work for a client in November or December. Instead of billing the client as soon as possible, you can send the bill at the start of the new year. The income received won’t be added to your taxable income until the following tax year.

Important: Be sure that you’re financially able to make it through to the start of the new year. There’s really no point in trying to save a few hundred dollars around tax season if you’ve got to “hobo-it” or “bum-it” for a month or so. Low taxes are great, but they shouldn’t dictate your life.

Traditional Employment: For those of you who are traditional employees, you’re less likely to defer paychecks, but it isn’t impossible. If you happen to receive a bonus near the end of the year, ask if you can get it at the start of the new year. Because most large companies use an accrual accounting method, they should still be able to deduct the bonus amount for the current tax year, while it isn’t added to your taxable income until the following tax year.

Remember: Your tax situation may be different from the next person, and you should consult with a tax professional before attempting anything that could lead to tax consequences. And during this time of year, with the holidays, gift-buying, and traveling, the suspension of income may not be in your best interest, but that’s fine. If you can’t do it this year, aim for it next year.

Make sure that your tax documents, either your 1099 or W-2, reflects the deferred income. If you happen to find a discrepancy, give yourself extra time to file a tax return by e-filing a tax extension with ExpressExtension. With our personal tax extension, you can receive an automatic 6-month extension within minutes, and you can use that time to get your information corrected.

Our live support team in Rock Hill, South Carolina is on standby to assist you with the e-filing process. If you have any questions or concerns, give us a call at (803) 514-5155 Monday through Friday from 9 a.m. to 6 p.m. EST. Feel Free to email us at anytime at support@expressextension.com, or live chat with us at www.expressextension.com.





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