Charitable Contributions

Donating to charity has many benefits. It’s good for the charity. It gives you that warm fuzzy feeling for contributing to a cause you believe in. It also may reduce your tax liability. Read on for answers to some of the most asked questions.

Can I deduct charitable donations?
If you itemize deductions, you can deduct contributions to qualified charities. Not sure if you itemize? Usually, if you pay mortgage interest, have significant medical expenses, or have significant unreimbursed job expenses, you itemize.

What is deductible?
You can deduct contributions to a qualified charity. The charity will be able to tell you if they are qualified. In general, qualified organizations include: religious organizations, non-profit schools, hospitals, war veterans’ groups, Salvation Army, Red Cross, United Way, Goodwill, etc.

You may deduct contributions of cash as well as non-cash contributions such as stock, property, and other material items (clothing, furniture etc.). You may also deduct your out-of-pocket expenses including mileage (14 cents per mile).

You may not, however, deduct the value of your time or services. You also may not deduct contributions to groups that are run for profit, political groups (including candidates for public office), or chambers of commerce.

Can I deduct gifts to an individual?
No. However, you are able to give any individual $12,000 per year with no tax consequence. This means you are not able to deduct it, but they are not required to report it as income either. If you gift more than $12,000 per year to any one individual, you will be required to file a Gift Tax return.

Do I need to have reciepts?
Always keep track of all charitable donations (including the date, organization, and amount). If you give a donation of $250 or more, you will need a receipt from the organization. Most contributions over $5,000 require a written appraisal, so please see your tax professional if you are considering a donation of this size. Be sure to get a receipt for any amount of actual cash donated.

How do I know what my non-cash contributions are worth?
It is up to you to determine the fair market value of non-cash donations. One way to determine this is to go to a thrift store to get an idea what they will be able to sell your items for. Another way is to use software like ItsDeductible, which has thousands of prices built in. If you are contributing a motor vehicle, please consult with a tax professional.

Are there limitations?
There are limitations to the total deductible charitable contributions in one year. If you donate more than 20% of your annual income, please see your tax professional for tax planning. This usually only occurs if you are giving stock or other property. Also be aware that non-cash charitable contributions (clothing, etc) must be in good or better condition.

Please note:
This article is intended to provide general information. Please see your tax professional for information specific to your tax situation.

Frequently Asked Questions (tax-related)

What should I do now that I’ve filed an extension?

Your tax return needs to be started right away. Getting started will help you determine what is missing. The sooner you find out what’s missing, the more time you will have to acquire the information. If you filed an extension because you expect to owe the IRS, be aware that it extends your time to file, but it does not extend your time to pay. Penalties and interest are accruing right now. Contact your tax professional today to find out about payment options.

Your extended return is due October 15th.

Where is my refund?
If you have not received your tax refund within 6-8 weeks, you should contact the IRS at (800) 829-1040. The IRS also has a secure online tool for checking refund status.

What if I haven’t filed yet?
It isn’t too late. If the IRS owes you a refund, there is no penalty for filing late. However, you will only receive your refund if you file within three years. If you owe the IRS, penalties are accruing for failure to file as well as failure to pay, so get those returns filed as soon as possible, even if you need to set up a payment plan.

Why didn’t I receive my whole refund?
You may owe back child support, delinquent student loans, or other government debt. Contact FMS (a department of the US Treasury) at 1-800-304-3107.

What is an Enrolled Agent?

An enrolled agent is someone who has earned the privilege of practicing, that is, representing taxpayers, before the Internal Revenue Service. Enrolled agents, like attorneys and certified public accountants (CPAs), are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can practice before.

Enrolled Agents are required to keep up with current tax law. They must complete at least 16 hours of continuing education every year, and at least 72 hours every three years.

One thing sets Enrolled Agents apart: they are tax specialists. CPAs and Attorneys know many different areas of their broad fields and may or may not specialize in taxation.

Changes for 2009

Important Tax Law Changes affecting Tax Year 2009

• Long-term Capital Gains: Beginning in 2008, the 5% tax rate on long-term capital gains is reduced to 0. Yes, you read that right. Zero. This special rate is available to taxpayers in the 10 or 15% tax brackets. (This is taxable income (after deductions) of $33,950 or less, $67,900 or less on Married Filing Joint returns.) This rate will continue to apply through 2010. For taxpayers in higher tax brackets, the long-term capital gain rate is still 15%.

• First time home-buyer credit: If you have not owned a home in the last two years and purchased a home between April 8, 2008 and December 31, 2008, you may choose to take a new credit up to $7,500. This credit is essentially an interest free loan, which must be repaid evenly over 15 years, beginning in 2010.  If you purchased a home between January 1, 2009 and December 1, 2009, the tax credit is $8,000 and it does NOT have to be repaid.  Income limitations apply.

• Charitable Donations: This was new for 2007, but it’s worth repeating. All charitable donations MUST be supported by bank records (canceled checks) or receipts from the charity. Logs to track cash donations are no longer sufficient. For non-cash contributions (clothing, household goods, etc.), items must be in “good or better” condition in order to be deductible.

• IRA Contributions: The maximum IRA contribution is $5,000 ($6,000 if you are over 50). If you are interested in making a contribution, please ask how it will affect your tax situation and whether Traditional or Roth contributions would be more beneficial.

• Gifts: The annual gift exclusion for 2009 is $13,000. You may gift anyone up to $13,000 without tax consequence (to you or the recipient).

If you have any questions about how these or other tax law changes affect you, please contact us for a complimentary planning appointment.

Corporate tax returns due

Corporate 1120 and 1120S tax returns due

1040-ES payment due

Personal estimated tax payments are due as follows:

1st quarter: April 15

2nd quarter: June 15

3rd quarter: September 15

4th quarter: January 15

Tax Day

1040-ES payment due

Personal estimated tax payments are due as follows:

1st quarter: April 15

2nd quarter: June 15

3rd quarter: September 15

4th quarter: January 15

Extended business taxes due

Business returns on extension (1120, 1120S, 1065) are due Sept 15.

Estate and Trust returns (1041) are also due Sept 15.

1040-ES payment due

Personal estimated tax payments are due as follows:

1st quarter: April 15

2nd quarter: June 15

3rd quarter: September 15

4th quarter: January 15

Next Page »