Accelerating expenses

[katdau71]

I was reading that for 2009, on Sch A, it is possible to accelerate 2010 unreimbursed business expenses, investment expenses, and tax prep fees which are subject to 2%. How exactly does this work?

[TAXBILLY]

First I've heard of it. Where did you read that?

taxbilly

[katdau71]

I read it from a news letter from Intuit. It says " accelerating and deferring the expenses so that one year's expenses result in a deduction. For example, if an employee buys a new business car...in 2009 or accelerates business trips from 2010 to 2009, he or she may have enough expenses to get over the 2% mark."

[NECPA in NEBRASKA]

It means they have to pay for the expenses or charge them to a credit card in 2009.

[katdau71]

That's what we were thinking. Thanks.

[jainen]

>>it is possible to accelerate 2010 unreimbursed business expenses<<

Standard advice at this time of year. It applies to ANY deductions over which the taxpayer can control timing. For example, instead of paying half the property tax in December and half in April, you can accelerate the payment and do it all in December. That will allow the whole deduction this year instead of waiting until next year.

The opposite is true too. If you don't need more deductions this year, you can delay the payment. For example, since medical bills have a 7.5% floor you might postpone this year's small payments so they are "bunched" to reach that floor next year.

Similarly, if you delay selling capital assets or taking a job bonus until after the first of next year, you will have a whole extra year before you have to account for it on the tax return. Or if you are going to be in a higher bracket next year, maybe you can pull the income back into this year.

A taxpayer does not always have this kind of control, but it's always something to watch for. Of course there are restrictions on the amount and timing of pre-payments, and constructive receipt rules might prevent delaying income. But it's pretty common to find at least limited ways to apply the techniques

[Jack from Ohio]

I knew the folks on the board were the most experienced a knowledgable preparers anywhere!

[Daune/CA]

I am sure you know that your tax preparation fee can also be advanced. I have had clients that would pay my fee in March/April and prepay the same amount in December, when I sent out my annual tax letter.

In the following year, we would adjust accordingly, if overpaid=a refund (unless you have some very nice clients that say, "That is okay, just keep it", or underpaid=they would pay the difference.

Of course my annual letter had that example somewhere in it, but it did work. Surprising how many come so close to itemizing, but if they had only paid something ahead it would work for them.

[kcjenkins]

It's especially useful if you do both accelerate and delay. For example, you are doing some dental work, and it's going to run over two years in all, and if you pay it as you go, you will not have enough to deduct any of it, either year. If you start the work in Dec, but delay paying anything until Jan, [delay] and then pay the balance in Dec [accelerate] even though the work will not be finished until March of the next year, you get all the expense in one year, giving you at least some deduction that year. Of course, you need to plan this with the doctor, dentist, etc, so that they understand and agree, as you don't want to harm your credit just to get an itemized deduction one year. :D