My wife is starting an architecture business as a sole proprietor. One significant expense is insurance.
Suppose that she pays $10,000 for insurance now that covers the period Nov. 1, 2012 to Nov. 1, 2013. Suppose also that she makes $5000 between Nov. 1 and the end of the year, and that she anticipates making $50,000 in 2013.
How can she take full advantage of the business expense to decrease her taxes?
For example, should she apportion two months of the insurance fee for her 2012 taxes and the remaining 10 months for her 2013 taxes? Should she pay the insurance in installments so that she is actually paying for most of it in 2013? Could the loss for 2012 be carried over to 2013?
I've heard about cash and accrual based accounting. Is that relevant here?
This is in Massachusetts.
As she is just starting, she hasn't chosen an accounting method, but cash based would be preferable as it seems much easier.