December 30 is the last business day of 2022. That means cash-basis taxpayers - that is, most of us - are running out of time to get most deductions for calendar-year 2022 tax returns. A few considerations for making sure your last-minute cash-basis deductions actually work for this year:
– A credit card is as good as cash. Better, even, because if you incur a business expense before the end of the year, you have your credit card statement to prove it. This also works for non-business deductions, like charitable contributions.
– If you mail a check for a business expense, the check needs to be in the mail and postmarked in 2022 to be a deductible 2022 expense. If it’s a big check, maybe you should spend a little extra to send it Certified Mail so you can document the postmark.
– If you receive a check in the mail, it’s taxable the day you receive it, even if you don’t deposit it.
– There is no “close is good enough” rule for cash basis taxpayers. Just because you could have paid a bill or made a contribution doesn’t get you a deduction if you didn’t pay it before year-end.
– Don’t overdo it. If you prepay business expenses more than a year out, you don’t get the deduction until the year to which the payment applies.
- Documentation matters. While credit card statements are nice, they aren't always enough to win a deduction if the IRS comes calling. Keep supporting documentation. If you are making a charitable contribution of $250 or more, make sure the charity provides documentation stating that no goods or services were received for the donation - or the amount received if there were any provided.
Contact your Eide Bailly tax pro if you have questions.