When you sit down with your accountant to talk about year-end tax planning, many of you will say, “ I plan to accelerate or do better with deductions for 2019.”
You should take caution to understand the IRS rules when it comes to adding deductions to your bottom line for the fiscal year. You may be scrambling to get those last minute write-off’s in before Dec 31st thinking that those checks automatically entitle you to claim it on your 2018 deductions.
This could be wrong! What does the IRS insist? Put your payments in the mailbox with enough time for letters to be postmarked by midnight Dec 31, 2018. If you put your letter in the mail on Dec 31st, most likely it may get postmarked Jan 1, 2019 because of the time it takes to collect the mail and process through the system.
The IRS is unconcerned when taxpayers use credit cards issued by third-party companies like Visa and Mastercard. Their ruling is that taxpayers deductions qualify as soon as the charge is authorized even if your credit card company doesn’t bill you til the next month in 2019. However, you might not be able to shift that write-off from 2019 to 2018 when you pay with cards by stores that bill directly. No deductions warns the Internal Revenue Service until you pay the bill.
Another IRS NO NO!
The IRS will not accept deductions for 2018 taxpayers that mail checks that are postdated to prevent cashing until 2019. The IRS rules and the courts agreed it makes no difference that they were mailed by Dec 31, 2018. The simple rule here is to make sure you pay your payments in with plenty of time to spare. A postdated check is not an immediate payment, but a promise to pay by a certain date and may banks will not honor such requests.
To protect your business, you should take care to keep your bookkeeping and payroll deductions up to date on a monthly basis. At Check-Write payroll, we can help you with both. https://www.accountingweb.com/tax/individuals/how-to-handle-end-of-year-payments