Timing income and expenses

This can be done for both cash basis and accrual basis tax-payers and has been the go-to tax planning strategy for many, many years. It’s still important to consider how timing will affect future years’ net income. 

Cash basis taxpayers can increase deductions by paying their bills in 2022, stocking up on supplies, and taking advantage of purchasing on credit cards. Credit card expenses can be used by cash-basis taxpayers in the year of purchase, even if the card payment is made in the following year. Cash basis taxpayers can decrease income by waiting to invoice customers until 2023. Be mindful that cash-basis taxpayers who report inventory can’t deduct inventory purchases in 2022 unless the taxpayers method of accounting classifies it as non-incidental materials and supplies. 

Accrual basis taxpayers can increase deductions by incurring the expense in 2022 but must be mindful of expenses they pay for and haven’t incurred. Accrual basis taxpayers can decrease income by holding off to finish the job and invoice in 2023.