The IRS arsenal includes some tricky rules that can upset the plans of individuals who intend to make end-of-year payments to move deductions into 2003 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 2003, instead of 2004.

Instead, caution the feds, 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 a sometimes unpredictable Post Office to actually deliver your checks by Dec. 31.

Just as long as you actually drop the letters in the mailbox in sufficient time for them to be collected and postmarked by midnight Dec. 31, you nail down deductions for this year, even if your checks are not cashed or deposited 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, no matter when they are mailed. Siding with the IRS, the Tax Court disallowed a deduction for the year of mailing, stating: "A postdated check is not a check immediately payable but is a promise to pay on the date shown. It is not a promise to pay presently and it does not mature until the day of its date, after which it is payable on demand the same as if it had not been issued until that date although it is, as in the case of a promissory note, a negotiable instrument from the time issued."

Tip. If IRS computers bounce your return for examination, odds are that the feds are going to look closely at large year-end checks dated Dec. 31 made out to charities, doctors, tax collectors and others. Clearly, you had deductions for this year in mind. So it is advisable to send such checks by certified mail. Request certified mail receipts, and staple them to your canceled checks. The receipts will back up your deductions for payments made with checks that might 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, write-off rules can be complex if you pay with plastic, and the source of the credit card is important.

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 Master Card. You get 2003 deductions for the amounts charged. It is immaterial that the credit card bills do not arrive until 2004.

But write-offs may be unavailable for this year when you use charge cards issued by stores and are billed directly. No deductions are allowed until you pay the bills.

What if you pay bills by telephone or at your bank on the last business day of the year -- in 2003, Wed., Dec. 31? Those payments are deductible in the year your account is debited, meaning that the deduction will be shifted to 2004, if, as can happen, the bank does not actually debit your account until the next business day -- in this case, Fri., Jan. 2.

Tip. File credit-card slips for donations and other deductibles with your tax records to avoid overlooking them at filing time.

Published: December 11, 2003

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Julian Block is an attorney and author based in Larchmont, N.Y. He has been cited as "a leading tax professional" (New York Times), "an accomplished writer on taxes" (Wall Street Journal) and "an authority on tax planning" (Financial Planning Magazine). This article is excerpted from "The Home Seller’s Guide To Tax Savings." Law professor James Edward Maule of Villanova University praised the book as "An easy-to-read and well-organized explanation of the tax rules. Home sellers would be well advised to buy this book." To order it, go to julianblocktaxexpert.com.