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    A matter of timing


    A Matter of Timing

    Filing status options
    Dan Kobaly
    As with most endeavors, timing is crucial when it comes to the availability of many common tax deductions, exemptions, and credits. Everyone is aware of the tax filing deadline, but what is the effect of the timing of "taxable events" like marriage, separation, and divorce? Death? The birth of a child, a child turning 18, or a child going to college? For travelers, in particular, what are the timing constraints of tax-advantaged assignments? How about the timing issues involved when leaving an employer that provided a 401k? The answers are not always what you would expect.

    Income, deductions, and credits

    One of the most common examples of how timing can affect your tax returns is income. For the most part, your income is included in the year you actually get it. Income is termed "constructively received" when it is credited to your account or made available to you without restriction. Therefore, a paycheck printed and mailed on December 31 is included in your W-2, even though you don't receive and deposit the check until the next year.

    In general, deductions and/or credits may only be taken in the year in which you purchase items. This includes payments made with a credit card, even though you may not pay for the charge until the following year.

    There is an exception for casualty losses that occur in a presidentially declared disaster area. In this case, you may accelerate the benefit of the deduction by claiming it on the return for the tax year before the event. For example, if you had this type of disaster loss in February of 2007, you could claim the loss on your 2006 tax return when you file. If you suffered the loss in June of 2007, after filing, you could elect to amend your 2006 return to receive an additional refund sooner than waiting until 2008 to claim it on your 2007 return. Of course, you would not claim it again on your 2007 return.

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    In addition, there is an exception in the other direction for qualified adoption expenses. These are usually taken as a credit in the next year.