Final answer:
Cash basis taxpayers can indeed choose to pay expenses at the end of the current year or the beginning of the following year, affecting their tax liabilities and potential for a tax refund.
Step-by-step explanation:
It is true that cash basis taxpayers often have the choice to pay expenses at the end of the current year or at the beginning of the following year. This is because cash basis accounting recognizes expenses when they are paid, not when they are incurred. The choice to pay before the yearly deadline, typically April 15th, can affect the taxpayer's financial statements and the amount of tax owed for that year. Making payments before the end of the year can increase expenses and decrease income for that year, potentially leading to a lower tax bill. Conversely, delaying payments until the beginning of the next year will lower expenses in the current year and increase them in the following year. This can sometimes lead to a tax refund, which occurs when an individual has paid more taxes than they owe, resulting in the government sending a check for the difference.
It is important to consider the implications of a budget deficit or surplus as well, which is the difference between tax revenue collected and spending over a fiscal year. The fiscal year for the federal budget starts on October 1 and ends on September 30 of the next year. The timing of expenses can play a significant role in the management of an individual's or a business's tax liability and financial planning strategies.