Knowing (And Managing) Your Tax Bracket

Over the years that you own and operate your small business, your income will, we hope, increase; most likely, it will also fluctuate from year to year. Because of the way the IRS and most states tax income, your changing income will probably place you in different tax brackets from year to year.

The good news is that you may be able to legally shift some of your business’s income and expenses from one tax year to another, saving yourself some tax dollars — perhaps even thousands of dollars — in the process. For example, if you operate your business on a cash basis — meaning that you recognize or report income in the tax year in which that income was received and expenses in the tax year that you paid them — you can exert some control over the amount of profit that your business reports in a given tax year.