IF YOU’RE LIKE most employees, you don’t have any control over when you receive your wages. Instead, as you seek to limit your annual tax bill, the key financial levers at your disposal include increasing your tax-deductible retirement account contributions, carefully managing your taxable investment accounts and making sure you take full advantage of the available tax deductions and credits.
What if you’re a senior executive or a business owner who can influence the company’s payroll policy? You might have more room for maneuver. For instance, if you know federal or state taxes are likely to rise next year, you might arrange for year-end bonuses to be paid this year.
If you’re self-employed or own a small business, there’s even more you might do. Got a lot of income in 2020 but suspect 2021 will be thinner? You might hold off billing clients so you get paid in 2021. Think 2021 will be a good year? You might wait until next year to buy new computer equipment or plan on maxing out your SEP IRA or solo 401(k) contributions.
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