Postponing income

Postponing income

Purposely delaying receipt of income to a later year in order to reduce current tax liability.

Postponing Income

The act or practice of not receiving otherwise expected income in a given tax year in order to reduce one's tax liability. For example, a company may postpone income if it has had a net operating loss in the year to date and wishes to apply it to future tax liability. Realizing income in the current tax year may eliminate that possibility. See also: Future Income Tax.
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Nonqualified deferred compensation (NQDC) plans allow executives and other high-income workers to defer income until a later date, postponing income taxes.
The first and foremost purpose is the ability to affect a company's taxable income in a given year by accelerating or postponing income or deductions.
On the other side of the coin, an exceptionally profitable year might warrant claiming every tax deduction to which the crushed stone, sand and gravel business is entitled; or postponing income wherever possible to reduce the current tax bill.
The cash method of accounting provides a limited but useful amount of planning flexibility in postponing income or accelerating deductions.
There is a deferral feature other than postponing income recognition until the later of the exercise or disposition of the option.
The only deferral-of-compensation feature is postponing income until the employee exercises the right.
Consider delaying exercise until next year if postponing income would be to your advantage.
Numerous strategies exist to help you, including reviewing professionally-developed year-end tax checklists, performing a marginal tax rate analysis to ensure you won't be pushed into a higher tax bracket unnecessarily, and postponing income and accelerating deductions (or vice versa).