From: larry@dprmpt.UUCP (Larry)
Newsgroups: misc.taxes
Subject: Re: What and When can I c
Date: 21 Jan 93 06:28:04 GMT
Reply-To: larry@dprmpt.UUCP (Larry)
Organization: Data-Prompt

In article <1993Jan14.183810.17573@cbnews.cb.att.com> ask@cbnews.cb.att.com (Arthur S. Kamlet) writes:
>In article <233.141.uupcb@tfd.coplex.com> terry.bunch@tfd.coplex.com (Terry Bunch)  writes:
>>>   jmv@cci632.cci.com (James Villard) writes:
>>>>Now that I can claim interest off my taxes, I was told I could pay the bill
>>>>on particular dates to get the best tax benefit for the year I can best use
>>>>
>>>>What are the restriction on this - can I pay Feb payment in Dec or not.
>>
>>LP>The payment is deductible on the day it becomes due, regardless of when
>>  >it is paid.
>>
>>That is not correct.  If you make a payment early you can deduct it in
>>the calendar year the payment was made.  I.E.  your mortgage payment is
>>normally due on Jan 15 '93 and you paid (and got credit from the
>>mortgage company) on or before Dec 31 '92.  You CAN write off the
>>interest in '92.
>
>In fact, you do not have to get credit from the mortgage company in
>1992.
>
>As long as you write and date and mail your check in 1992, you can
>deduct even if the mortgage company doesn't receive the payment
>until 1993.

That's what I thought, too, BUT...

I sent my mortgage company a check for both my January and February
house payments a week before the end of 1992 so I could claim the
extra month's interest in 1992.  I specifically noted on the payment
stubs that the extra check was for the Feb. 1993 payment and NOT to be
applied to reduce principal or escrow.

When I got my "1098 Substitute" statement 3 days ago, it said:

	TOTAL INTEREST APPLIED 1992 (NEXT DUE DATE 03/01/92) $ X,XXX.XX
	  LESS NET PREPAID INTEREST - CURRENT YEAR               YYY.YY
	1992 NET INTEREST PAYMENTS REPORTED TO IRS *****     $ Z,ZZZ.ZZ

$ xxx.xx represents the interest portion of the Feb. 1993 payment.  I 
called Customer Service and was told that "the IRS told them that only the
January payment's interest could be deducted in 1992" and said that
this was not the bank's rule but that the IRS made them do it this
way.  What this means is that even though I paid the extra payment in
1992 and the bank received and posted it in 1992, I still cannot
deduct it until 1993.  I'm confused !?!?  This means I get the same
interest deduction this year whether I paid the extra interest or
not!
>
>I suspect more checks for deductible taxes and interest and medical
>payments and charities, etc, are dated December 31 than any other
>day of the year.

Yeah, but if the bank is correct, then any prepaid interest is only
deductible if the bank reports it to the IRS as "Paid in 1992" and you
receive a Form 1098 to that effect.

I will be checking with the IRS and my CPA on this and will post a
followup for those interested.
>-- 
>Art Kamlet  a_s_kamlet@att.com  AT&T Bell Laboratories, Columbus


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Newsgroups: misc.taxes