Taxes, Yuck!

When I wrote tax articles for The Californian several years ago, this was the title of my article and it still seems appropriate today. I am a Tax Practitioner and active for more than 25 years in the tax preparation field. I went into private practice in 2006 after being a director for a major national tax preparation company for many years. And many of my clients have been with me for more than 20 years.

When I wrote tax articles for The Californian several years ago, this was the title of my article and it still seems appropriate today. I am a Tax Practitioner and active for more than 25 years in the tax preparation field. I went into private practice in 2006 after being a director for a major national tax preparation company for many years. And many of my clients have been with me for more than 20 years.

There are several tax bills active in the Senate and the House for awhile now. One may pass soon, but the chance of it going into effect for 2017 is not likely. If it passed this month, there would be a scramble to get all the tax forms approved by the IRS for e-filing and the software in operation by January. So not very likely.

One of our concerns for this tax proposal is increasing the standard to about $24,000 for a married couple. And we may also lose the dependent exemption deduction. But if it passes the charity deduction may get lost in the shuffle and property taxes and mortgage interest may also be reduced. Because of this, it might be advisable to do an extra payment on your property taxes and your mortgage to get a greater deduction of interest. Also it is recommended to increase your charity deductions for this year for the same potential reason. And I’m sure your favorite charities would not refuse the extra contributions!

Five Facts about Charitable Contributions

With the holidays around the corner, many people will be making donations to benefit charitable organizations. However, come tax time, the person who made the donation might also benefit. That’s because taxpayers who donate to a charity may be able to claim a deduction for the donation on their federal tax return.

Qualified Charities. A taxpayer must donate to a qualified charity to deduct their contribution. Gifts to individuals, political organizations, or candidates are not deductible. To check the status of a charity, taxpayers can use the Exempt Organizations Select Check on the IRS.gov website.

Itemized Deductions. To deduct charitable contributions, taxpayers must file Form 1040 and itemize deductions on the Schedule A. To do this taxpayers complete the Schedule A for their itemized deductions. They must file this form with their tax return.

Getting Something in Return. Taxpayers may receive something in return for their donation. This includes things such as merchandise, books and tapes, meals, and event tickets. Taxpayers can only deduct the amount of the donation that’s more than the fair market value of the items they received. To figure their deduction, a taxpayer would subtract the value of the item received from the amount of their donation.

Type of Donation. For donations of property instead of cash, a taxpayer can only deduct the fair market value of the donated item. Fair market value is generally the price they would get if they sold the item on the open market. If they donate used clothing and household items, furniture, computers, etc those items generally must be in good condition. Special rules apply to certain types of property donations, such as cars and boats.

Donations or $250 or more. If a taxpayer donates $250 or more in cash or goods, they must have a written receipt from the charity. The statement must show; the amount of the donation, a description of the property given, whether the taxpayer received any goods or services in exchange for their gift, and if so, provide a description and good faith estimate of the value of those goods or services. And if the non-cash donation exceeds $500 it needs to go on the Form 8283

Taxpayers can also use the interactive Tax Assistant on the IRS website and search; “Can I deduct my charitable contributions?” This tool helps determine if the charitable contribution is deductible. 

More Information

Tax Topic No 506- Charitable Contributions

There is so much more to cover, but I will postpone that time until my next article. Some of the future topic will be; How to Know If The Knock on Your Door Is Actually Someone From the IRS, Five Things to Know About Estimated Taxes and Withholding, Getting Ready for Taxes: Plan Ahead to Avoid Refund Delays, Getting to Know Your Taxpayers Bill of Rights, And How To Know If Your Tax Preparer is Licensed to Prepare Your Taxes. And the tell tale signs that they are not. Going on CTEC.ORG and entering in their information can verify it. FTB in California estimates that over 5000 tax preparers are not licensed to prepare tax returns in California.

If you would like to direct a tax question to my office, please send it to taxhelp92021@hotmail.com and I will respond with my best interpretation within 72 hours. If I have not responded by that time, please resend just in case it got lost in the Internet process.