Posts tagged Taxes
Ten Tips for Taxpayers Making Charitable Donations
Aug 26th
IRS Summertime Tax Tip 2010-21 http://bit.ly/aVjA6r
Did you make a donation to a charity this year? If so, you may be able to take a deduction for it on your 2010 tax return.
Here are the top 10 things the IRS wants every taxpayer to know before deducting charitable donations.
- Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.
- Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
- You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
- If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
- Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the name of the organization, or a payroll deduction record.
- Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.
- Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
- For any contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash and a description and good faith estimate of value of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.
- To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.
- An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.
For more information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Links:
- Publication 78, Cumulative List of Organizations
- Publication 526, Charitable Contributions ( PDF)
- Publication 561, Determining the Value of Donated Property ( PDF)
How to Replace Six Vital Documents
Aug 24th
Could you produce your birth certificate, car title, or an old tax return at a moment’s notice?
You’re supposed to store vital documents in a fireproof box or keep them in a safe-deposit box, but how many of us actually do that? We may not need these papers often, but when we do need them, we really need them. You need vital documents to sell your car, travel overseas, apply for a job, get through an audit, refinance your house, and more.
The good news is that if you’ve lost important pieces of paper, you can replace them — and it might be easier than you think. Here’s how to replace six of the most important documents in your life.
To read the rest of this article by April Dykman, staff writer for Get Rich Slowly, please go to http://bit.ly/bg8V6o.
Five Tax Tips for Recently Married Taxpayers
Aug 20th
IRS Summertime Tax Tip 2010-17 http://bit.ly/aTAVuk
Are you getting married this summer? If you recently got married or are planning a wedding, the last thing on your mind is taxes. However, there are some important steps you need to take to avoid stress at tax time. Here are five tips from the IRS for newlyweds to keep in mind.
- Notify the Social Security Administration Report any name change to the Social Security Administration, so your name and Social Security Number will match when you file your next tax return. Informing the SSA of a name change is quite simple. File a Form SS-5, Application for a Social Security Card, at your local SSA office. The form is available on SSA’s website at www.socialsecurity.gov, by calling 800-772-1213 or at local offices.
- Notify the IRS If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from IRS.gov or order it by calling 800–TAX–FORM (800–829–3676).
- Notify the U.S.Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.
- Notify Your Employer Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
- Check Your Withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will even provide you with a new Form W-4, Employee’s Withholding Allowance Certificate, you can print out and give to your employer so they can withhold the correct amount from your pay.
Hire Your Kids, Cut Your Taxes
Jul 30th
The keys to success:
- Your business is not incorporated.
- You hire your children to work for you in your business.
- You pay them reasonable wages.
If you do those three things, you can deduct their wages from your income and shift the money to your children who will be in much-lower tax brackets.
Here’s how my three-step hiring process works:
To read the rest of this article by Jeff Schnepper, MSN Money, please go to http://bit.ly/b2SJkr.
Life Events Present Financial-Planning Opportunities
Jul 20th
In June, I discussed the myriad issues clients often overlook or ignore that require changes in their estate plans. That column mentioned key life events that may necessitate estate plan updates. I merely listed them because the implications for planning seemed obvious. But on further reflection, I realized that some changes, such as the birth of a new child, have implications that are not always obvious. Although parts may seem basic, the list contains good talking points for advisors and clients.
To read the entire article by Martin Shankman, an estate planner in Paramus, N.J., please go to http://bit.ly/dx7Hte.
No Tax on Health Care Benefits for 2010 or 2011 or…
Jul 12th
How can you tell it’s an election year? By the sheer number of scare tactics and outright lies being shuffled about.
An email is making the rounds – again – suggesting that health care benefits will appear on forms W-2 and will be taxed.
To read the rest of the article, please go to http://bit.ly/9WYZYp
A Win-Win Tax Break: Buy Your Parents’ Home and Rent It Back
Apr 5th
Do you have older parents living in a house that has appreciated in value and who can no longer reap the tax breaks of homeownership? Consider buying their house and renting it back to them. All of you will benefit.
If your parents’ mortgage is paid off or if they are only making payments on principal, their tax bracket might be so low the mortgage interest deduction doesn’t matter. Chances are they don’t have enough deductions to beat the standard deduction amount and don’t itemize. Mortgage interest paid then is of no tax savings value to them.
In this situation, you and your parents will benefit from a sale/leaseback. By selling their home to you, your parents will gain cash without needing to refinance their home or get a home equity loan. And, by your leasing the house back to them, they don’t have to move. You, as the buyer and landlord, gain the tax benefits of owning rental property.
Make sure you pay a fair price for the house and support that price with a qualified and independent appraisal in order to avoid any gift-tax complications.
A word of warning: You can reduce the fair-market rent by 20% when renting to relatives. If you set the rent too low, the IRS can claim the rental home is for your personal use and limit the deductions as if the property were a vacation home.
Source: Small Business Tax Strategies, March 2010
Records: Keep or Toss?
Jan 20th
If you’re like many of our clients, you are sometimes confused about which documents to save and which ones you can get rid of (see, shred in a quality paper shredder to protect your identity). If you’re staring at a pile of papers or boxes of papers, worried that you may need some of them at some point, here are a few basic tips on what to keep and what to toss (if you’re not sure, save it, these are just guidelines).
WHAT TO KEEP
- The most important documents to keep are your annual tax returns. You should keep the actual returns forever, but you can get rid of the supporting documents after three years – which is how long the IRS has to initiate an audit. If you’re self-employed, you need to keep supporting tax documents for six years, the amount of time the IRS has to come after you. Once that time is up, toss the records, shredding any that reveal your Social Security number or other personal information.
- Other papers to save for at least three years include thank-you letters from charities and year-end investment statements. You don’t need to save your monthly mutual fund reports forever. But before you toss them, wait for the year-end statements and make sure they match up.
- Records that show the initial purchase price for stocks and mutual funds so you can calculate your basis when you sell them. After that, you can shred the documents once the three- or six-year IRS window draws to a close.
- Save records pertaining to your house as long as you live in it. Records showing your purchase price, and what you spent on improvements, may come in handy when you’re trying to prove the value of your home to potential buyers. Another reason to keep these papers: If you sell your house at a hefty profit (more than $500,000 for couples filing a joint return or $250,000 for single filers), certain expenses can be used to lower your tax bill. After you sell the house, keep the documents for three years.
- Records showing how much money went into and came out of IRAs and 401(k)s — especially if you’ve made any nondeductible contributions — so you don’t overpay taxes when you withdraw the money. Keep any 8606 forms on which you reported nondeductible contributions to traditional IRAs.
WHAT TO TOSS
- ATM receipts, bank withdrawal and deposit slips, and credit-card receipts can go through the shredder after you’ve checked them against your monthly statements.
- Paper copies of most monthly bills — for credit cards, utilities and cable TV — unless you need them for tax purposes.
Five Filing Facts for Recently Married or Divorced Taxpayers
Jan 7th
If you were married or divorced recently, there are a couple of things you’ll want to do to ensure the name on your tax return matches the name registered with the Social Security Administration.
Here are five facts from the IRS for recently married or divorced taxpayers. Following these steps will help avoid problems when you file your tax return.
- If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.
- If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
- Informing the SSA of a name change is a snap; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office.
- Form SS-5 is available on SSA’s Web site at www.socialsecurity.gov, by calling 800-772-1213 or at local offices. It usually takes about two weeks to have the change verified.
- If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. The W-7A is available on IRS.gov, or by calling 800-TAX-FORM (800-829-3676).
Source: IRS.gov
