Maximizing Yearend Payments

Contrary to what many people scrambling for last-minute breaks prefer to believe, dating your checks for 12/31 doesn’t automatically entitle you to claim the expenses for this year, rather than next.  

Whether a deduction falls into this year or next depends on a check’s date of delivery, which isn't necessarily the date written on the face of your check.  Fortunately, date of delivery doesn’t mean that you have to depend on snail mail to actually deliver your checks by 12/31.  

As long as you put payments in the mail with sufficient time for letters to be postmarked by midnight on the last day of the year, you nail down deductions for this year, even if your checks reach your intended recipients next year.  

This applies to:

·         payments of business expenses

·         charitable contributions

·         medical bills

·         interest expenses

·         state and local taxes

·         all other deductions

It is important to note, however, that you will not get deductions for this year by mailing checks that are postdated to prevent cashing until next year, no matter when they’re mailed.  

The IRS won a courtroom victory in 1967, when the Tax Court disallowed a deduction for the year of mailing.  The court stated that “A postdated check is not a check immediately payable, but is a promise to pay on the date shown.  It is not a promise to pay presently and it does not mature until the day of its date, after which it is payable on demand, the same as if it had not been issued until that date, although it is, as in the case of a promissory note, a negotiable instrument from the time issued.”

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