"Constructive payment" rules?

The traditional rule is referred to as the "mailbox" rule - it's considered paid when you drop a check in the mailbox.

The logical extension of the mailbox rule is that your bill is paid when you direct your service to make the payment. At the very latest it should be considered paid when the money was removed from your account. When the money is received by the creditor is generally irrelevant.

Here is a variation on this theme.

I am required to make the Federdal tax deposts for my one-person business using EFTPS. If I make a deposit on December 31, 2018, for example, the earliest EFTPS will debt my bank account is January 2,

2019.

For tax putposes, I consider the date of payment to be December 31,

2018, since the commitment to pay by EFTPS on the next business day is at least as strong as if I had deposited a check in the mail on that date. Do you agree?

Thanks,

Vic Roberts

Among other issues, the amounts in question would have to be "due and payable" in 2018 in order to result in a 2018 deduction. Otherwise you've simply got a prepaid expense that wouldn't be deductible until the year it applies to.

MTW wrote in news: snipped-for-privacy@googlegroups.com:

I thought that prepayments are deductible if they are otherwise due within 12 months of the date of payment.

I don't think that's right for property taxes, at least.

In New York State, county and town property tax is due in January. In December 2017, Governor Cuomo issued an emergency order to town clerks to advance the warrant date for January 2018 tax bills to the last week of December 2017, specifically so that New Yorkers could make the payments and have them be deductible on 2017 Federal tax. If prepayments up to 12 months were deductible, he wouldn't have needed to do that.

Would the rule be different for property taxes versus other type of prepayments?

Here's what I was thinking of - from IRS Publication 535:

"You generally cannot deduct expenses in advance, even if you pay them in advance. This applies to prepaid interest, prepaid insurance premiums, and any other prepaid expense that creates an intangible asset. If you pay an amount that creates an intangible asset, then you must capitalize the amounts paid and begin to amortize the payment over the appropriate period.

"However, you do not have to capitalize amounts for creating an intangible asset if the right or benefit created does not extend beyond the earlier of 12 months after the date that you first receive the right or benefit or the end of the tax year following the year in which you made the advance payment. If you are a cash method taxpayer and your advance payment qualifies for this exception, then you can generally deduct the amount when paid. If you are an accrual method taxpayer, you cannot deduct the amount until the all-events test has been met and economic performance has occurred."

IIRC Governor Cuomo issued an order ALLOWING towns/counties to issue tax bills (or whatever) earlier than normal, to address this issue. But not all towns/counties did so.

Payments made on actually determined bills have always been deductible, perhaps with the one year limitation noted by Stuart. California property tax bills are issued in the fall, with one payment due before December, the other before April (actually, those are their delinquent dates). Paying the second half in December was always an option to put the federal deduction in the prior calendar year.