2011 year-end
tax planning:
Some last-minute tips
In 2004,
Congress
imposed
severe new
penalties
“
for failure
to file the
FBAR.”
Decemberrepresentsonelastchance to consider certain year-end tax strategies before the door closes
on the amount of income, deductions and
credits set for the year. Many traditional
eleventh-hour techniques are applicable to
this year-end 2011, with certain twists that
recognize changes on the horizon for 2013.
This column examines a handful of considerations especially useful to the individual
taxpayer in these final weeks of 2011.
Note: While we will examine in this column how uncertainty for 2013 projects itself
onto 2011 year-end tax planning, it should
be noted that, as we go to press, no resolution has been found over those “expiring
provisions” due to sunset at the end of 2011.
They include, among others, 100 percent bonus depreciation, a payroll tax reduction, a
higher alternative minimum tax exemption,
the higher education expense deduction, the
optional itemized deduction for state and local sales tax, non-business energy credits,
the classroom expense deduction and the
nontaxable charitable contribution of IRA
assets by those over age 70 1/2. As explained
in our October column, 2011 year-end planning must include keeping a watchful eye
over what Congress will do and acting quickly
in late December if extensions are not forthcoming.
George G. Jones, JD, LL.M, is managing editor, and Mark A. Luscombe, JD, LL.M, CPA,
is principal analyst, at CCH Tax and Accounting, a Wolters Kluwer business.
TIMING CONSIDERATIONS
When accelerating or deferring income or
expenses at year-end as part of an overall
strategy, certain timing rules become critical.
Those more frequently used at year-end —
and sometimes more frequently overlooked
— include:
Actual payment rule. Cash-basis taxpayers who want to maximize their deductions
and credits for 2011 must make a payment
of each expense-giving rise to a deduction
or credit by December 31. A cash-basis taxpayer generally is entitled to a deduction only
when actual payment is made, irrespective
of the fact that the expense has already been
incurred. “Cash substitutes” under this rule
include:
Payment by check. If the check is mailed,
the payment is considered made at the time
of mailing, even if the check is received in
the following year, as long as the check is
honored in the routine course of business.
If the recipient delays but ultimately cashes
the check, and the date of delivery is not dis-
puted, the payment dates back to the time the
check is delivered or mailed.
