Delaying income into next year could mean climbing rates and uncertainty. Long term capital gains are usually easier to decipher. The current 15% rate jumps to 23.8% on January 1, which comes from a combination of the new 20% rate plus the 3.8% health care add on that will hit most with incomes above $200,000. Ordinary income is not as clear; although, top rates jump from 35% to 39.6% in January, the payroll tax cut ends too.
If you have a legal right to payment, the IRS can tax you even if you choose not to receive it. It is known as a constructive receipt. The best example of this is a bonus. Say your employer tries to give you a bonus at year-end, but you insist on receiving it in January to postpone taxes. Because you had the right to receive it in December it is taxable then even though you might not pick it up until January. If your company agrees to delay payment and actually reports it as paid in January you will probably be successful.
To find out how we can help you, make an appointment with us today at 401-254-0151. We look forward to hearing from you.
