The Internal Revenue Service has some tricky regulations that can upset the plans of individuals who make end-of-year payments to move deductions into 1990 because they are more advantageous this year than next.
Contrary to what people scrambling for last-minute breaks prefer to believe, dating your checks Dec. 31 does not automatically entitle you to claim the expenses for 1990, instead of 1991.
Instead, cautions the IRS, whether a deduction falls into this year or next depends on a check's date of delivery, which is not necessarily the date written on the face of a check. Fortunately, "date of delivery" does not mean that you have to depend on an unpredictable post office to actually deliver your checks by Dec. 31. Just as long as you actually drop the letters in the mailbox by Dec. 31 and they are postmarked by midnight that day, you nail down deductions for this year, even if your checks are not cashed until after the start of next year. That requirement applies to payments of charitable contributions, medical bills, interest expenses and all other deductions.
CAUTION: You garner no deductions for this year by mailing checks that are postdated to prevent cashing until next year.
TIP: If the feds audit your return, odds are that they are going to look closely at large year-end checks dated Dec. 31 and made out to charities, doctors and others. Clearly, you had deductions for this year in mind. So it is advisable to send such checks by certified mail. Request return receipts and staple them to your canceled checks. The receipts will back up your deductions for payments made with checks that may not clear the bank until well beyond the close of the year.
CREDIT CARDS: They come in handy should you be without enough cash to pay for the deductions that you would like to take by Dec. 31. However, the write-off rules can be complex if you pay with plastic.
The rules are helpful when you pay for deductibles like charitable donations, medical services or business expenses with bank or similar credit cards issued by third parties such as Visa and MasterCard. You get 1990 deductions for the amounts charged. It is immaterial that the credit-card bills do not arrive until 1991.
TIP: File credit-card slips for donations and other deductibles with your tax records to avoid overlooking them at filing time.