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Background

I run a small business and we have a fortune 500 company as one of our clients. This is great and all except that they push us around as far as finances are concerned. They always pay, but never on time.

Scenario

Recently they were two months delinquent on invoices. I expected this was to budget out their quarterly taxes. The issue is that I had already budgeted for year-end and now I have an extra 40k and 2 weeks get rid of it.

Question

Is there anyway I can push this money into 2019 without being taxed on it in 2018? I assume not so my follow-up question is: what should I do with it short of bonuses and new products?

  • How do you have extra money? Was your budget made under the assumption that they would pay later than they actually did? – chepner Dec 14 '18 at 22:04
  • Couldn't you book the revenue when you invoice your client, not when you receive it? – Chris W. Rea Dec 14 '18 at 22:16
  • They've made a habit of "paying when they want to" and since admitting that would be against our contract they just push us small business around, because they can. Considering this, I expected not to see the money until January per our history up to this point. It is what it is. – Jacksonkr Dec 17 '18 at 17:31
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I expected this was to budget out their quarterly taxes

This seems very unlikely. C Corps are required to use the accrual accounting method, which means that their tax is determined by when their revenue and expenses occur, not necessarily when they pay their invoices. Even very large non-C corps probably user accrual accounting just because it's easier to manage that cash accounting in large companies.

Is there anyway I can push this money into 2019 without being taxed on it in 2018?

Not directly. If you use accrual accounting, then you should account for the revenue in the year in which it's earned. If you use the cash method, you count the revenue when the invoice is paid, so either way the income will be reflected in your 2018 taxes. So you'll need to have some sore of expense if you want to reduce your taxable income for this year (which just defers the tax until your next estimated payment).

If you have any large expenses planned for 2019, you could make those purchases this year. Or pay a bonus as you mentioned (I'm sure your employees won't care about the tax hit as much as you seem to). But DON'T make unnecessary purchases just to reduce your tax benefit. That's just wasting $1 to keep from sending the government 30 cents or so.

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