IRS Ends Last-Ditch Write-Offs for Multi-Year Business Costs

The Internal Revenue Service on Friday threw up a brick wall in front of taxpayers seeking to grab last-chance tax deductions by paying for magazine and newspaper subscriptions, union and professional association dues, safe deposit box rentals and other business-related expenses for years in advance.

The agency said taxpayers may write off against this year’s taxes only the portion of the payment that covers next year.

Thus, a taxpayer who buys a three-year magazine subscription now would only be able to deduct from 1986 taxes that part of the payment that covers 1987. Likewise, a taxpayer buying a renewal for a subscription expiring June 1, 1987, would be able to deduct only the portion of the payment that covered the seven months of the renewal that occurred in 1987.

Business, Investment Claims

The restriction on deducting prepayments applies to all miscellaneous business and investment expenses claimed by individuals, the IRS said.

Tax accountants and others have been advising taxpayers to prepay some expenses this year before some deductions will not be allowed under the new tax law.

Deductions by individuals for miscellaneous business and investment expenses are worth more this year because many taxpayers will be paying at a higher rate than after the tax changes take effect and because the new law limits the extent to which those expenses can be deducted. In the future they will only be deductible if they exceed 2% of adjusted gross income.

A number of magazines and newspapers have recently sent renewal notices and invoices to subscribers suggesting they sign up for a subscription several years in advance to take advantage of potential tax savings.

Promotions Help

Although it is impossible to tell how many taxpayers have rushed to take advantage of presumed year-end tax savings, some of the promotions for long-term subscriptions have borne fruit.

“This year because of the additional clout of the end of tax deductibility, we’ve gotten a response more than twice the normal . . . “ said John M. Thornton, circulation director for Forbes magazine.