Question

Charlie’s Green Lawn Care is a cash basis taxpayer. Charlie Adame, the sole proprietor, is considering delaying some of his December 2017 customer billings for lawn care into the next year. In addition, he is thinking about paying some of the bills in late December 2017, which he would ordinarily pay in January 2018. This way, Charlie claims, he will have “less income and more expenses, thereby paying less tax!” Is Charlie’s way of thinking acceptable?

Answer 1

Cash basis tax payer :

Cash Basis Taxpayer' A taxpayer who reports income and deductions in the year that they are actually paid or received. Cash basistaxpayers cannot report receivables asincome, nor deduct promissory notes as payments.

in given case :

Charlie Adame, the sole proprietor, is considering delaying some of his December 2017 customer billings for lawn care into the next year. In addition, he is thinking about paying some of the bills in late December 2017, which he would ordinarily pay in January 2018.

As on the he didn't realise any receivables ,he need not show such delayed receivables as income, and he also paid some bills in late December which are payable in January, can be considered as expenses on cash basis.

Conclusion:

Though in current month by realising lesser income and incurring more expenditure he may reduce his tax burden, but Same needs to be payable in the next due date.

It's a simple postponement of the tax payable not an evation.