The receipt of that income tax form might get you thinking about some last-minute deductions you could run up this week to increase the write-off on your 1981 return. Financial advisers are urging people to adopt this tried and true tax practice particularly this year because the tax rate reduction due in 1982 makes deductions worth more this year than next.
Basically, you can deduct from your 1981 return any deductible expense you paid for during this year. So you could write a bunch of checks--interest payments, medical bills, contributions, etc.--as late as Thursday (Dec. 31) and still get 1981 deductions. But there's a kicker, as a recent Tax Court case demonstrates.
The taxpayer paid his January, 1978, office rent with a check dated Dec. 31, 1977--and deducted the amount as a business expense on his 1977 return. The IRS disallowed the deduction, saying the payment hadn't really been made in 1977. On appeal, the taxpayer showed the court his canceled check, with its 1977 date. But the court demanded further evidence: proof that the check was both written and delivered--hand-carried or dropped in the mail--in 1977.
The taxpayer had no proof. The court, noting that the check hadn't cleared his bank until Feb. 6, decided the taxpayer had actually paid in 1978, but backdated his check to get the 1977 write-off. Deduction disallowed. (Walker v. Comm'r.)