Year End Charitable Donations

Guidelines for Monetary Donations

To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity. These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.


Reminders

To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders:

* Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2009 count for 2009. This is true even if the credit card bill isn’t paid until 2010. Also, checks count for 2009 as long as they are mailed in 2009 and clear, shortly thereafter.
* Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.
* For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2009 Form 1040 Schedule A, available now on IRS.gov, to determine whether itemizing is better than claiming the standard deduction.
* For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
* The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. So be mindful when you give a car to that charity of your choice, if they sell it for a couple hundred scrap, that is your deduction. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
* If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

Energy Savings Credit for 2009 & 2010

The year end is approaching.  If you were thinking about doing windows, adding insulation, or upgrading your heating or a/c system.  Do so before December 31, 2009 to tke advantage of the credit, up to $1500 on your 2009 tax return.  The credit will also be available in 2010.

The American Recovery and Reinvestment Act (ARRA) provides numerous tax incentives for individuals to invest in energy-efficient products.

Residential Energy Property Credit (Section 1121): The new law increases the energy tax credit for homeowners who make energy efficient improvements to their existing homes. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 for improvements placed in service in 2009 and 2010.
The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.

A similar credit was available for 2007, but was not available in 2008. Homeowners should be aware that the standards in the new law are higher than the standards for the credit that was available in 2007 for products that qualify as “energy efficient” for purposes of this tax credit

Fake IRS email sends Malware to your computer

Scam E-mail Sends Malicious Software to Recipients' Computers

In recent weeks, a phony e-mail claiming to come from the IRS has been circulating in large numbers. The subject line of the e-mail often states that the e-mail is a notice of underreported income. The e-mail may contain an attachment or a link to a bogus Web page directing taxpayers to their "tax statement." In either case, when the recipient opens the attachment or clicks on the link, they download a Trojan horse-type of virus to their computers. A few of my clients have received this type of fake email and the senders address looked like Official@irs.gov.taxnotices.com Malicious code (also known as malware), of which the Trojan horse is but one example, can take over the victim’s computer hard drive, giving someone remote access to the computer, or it could look for passwords and other information and send them to the scammer. The scammer will then use whatever information they gather to commit identity theft, gain access to bank accounts and more. The IRS does not send unsolicited e-mails to taxpayers about their tax accounts. Anyone who receives an unsolicited e-mail claiming to come from the IRS should avoid opening any attachments or clicking on any links. People can report suspicious e-mails they receive which claim to come from the IRS to a mailbox set up for this purpose, phishing@irs.gov. Those who believe they may already be victims of identity theft should find out what do by going to the U.S. Federal Trade Commission's Web site, OnGuardOnLine.gov. More information on e-mail scams may be viewed on How to Report and Identify Phishing, E-mail Scams and Bogus IRS Web Sites and Suspicious e-Mails and Identity Theft.

American Opportunity Tax Credit

American Opportunity Tax Credit


Many Parents and college students will be able to offset the cost of college over the next two years under the new American Opportunity Tax Credit.  This tax credit is part of the American Recovery and Reinvestment Act of 2009.


1. The credit, which expands and renames the Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 & 2010.  Qualified tuition and related expenses included tuition, related fees, books, and other required course materials.


2. The credit is equal to 100% of the first $2000 spent and 25% of the next $2000 per student each year.  Basically, the full $2500 credit will be available for taxpayers who paid $4000 or more in qualifying expenses for an eligible student.


3. The full credit is subject to income phase outs (AGI limitations) of $80,000 for single taxpayers and $160,000 for married couples.


4. 40% of the credit is refundable, so even those who owe no tax can get up to $1000 of the credit for each eligible student as cash back.


5. The credit can be claimed for qualified expenses paid for any of the first four years of post-secondary education.


6.  You cannot claim the tuition and fess tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit.  You must choose to either take the credit or the deduction, which ever is more beneficial for you.

IRS Extends Offshore Account Disclosure Deadline

IRS Extends Offshore Account Disclosure Deadline for the Last Time....Seriously no more extensions

The Internal Revenue Service has again extended the deadline for taxpayers to make voluntary disclosures of the unreported income they have stashed in hidden offshore accounts, but warned this would be the final extension.
The deadline was originally supposed to be Sept. 23, 2009  but has been extended to a new deadline of Oct. 15, 2009 “Those taxpayers who do not voluntarily disclose their hidden accounts by the new deadline face much harsher civil penalties, where applicable, and possible criminal prosecution,” said the IRS.  We are talking big fines here in excess of $10,000 per year (Consult with your CPA or Tax attorney for account specific penalties)

IRS officials decided to extend the deadline after receiving repeated requests from tax practitioners and attorneys around the country following an influx of taxpayer requests. By extending the deadline for a short period of time, the IRS said it is providing relief for those taxpayers who had intended to come forward prior to the deadline, but faced logistical and administrative challenges in meeting it. The extension will allow tax preparers and attorneys the necessary time to interview and advise their backlog of taxpayers with these hidden accounts, and prepare the necessary paperwork to qualify for the special penalty provisions.

This is all a component of the IRS Voluntary Disclosure as seen Here: http://www.irs.gov/newsroom/article/0,,id=104361,00.html

The September 23, 2009, deadline for certain FBAR (Foreign Bank and Financial Accounts) filers and certain offshore-related information returns (Federal Form 5471, etc..) who have no unreported income is also extended to October 15, 2009.

Here is the IRS Q&A with regards to both Voluntary Disclosures and FBARs, it has been updated 4 times so make sure if you use it as a guide you read it more than once, http://www.irs.gov/newsroom/article/0,,id=210027,00.html

Sales Tax on Shipping & Handling in NYS

New York State Sales Tax

From time to time I get asked very specific questions regarding the collection and remittance of sales tax in New York State.  A question that recently came up by my client was one regarding the partial refund of a transaction that involved shipping and handling. 

The client's transaction was as follows:
Sale of $100
Shipping & Handling of $25
Subtotal $125
Sales Tax (NYC) $11.09
Total $136.09

Now what happens if the client refund the sale but retians the shipping and handling as part of their terms and conditions.

Refund of Sale $(100)
Refund of sales tax on Sale $8.84
Total refund $108.84

As you can see, the client retianed the sales tax on the shipping and handling and will be liable to remit that sales tax collected to NYS with their next sales tax return (Either Annualy, Quarterly, or Monthly depending on their sales figures).

Staten Island CPA

End of Summer - Tax Credits for September & Education

Education tax credits can help offset the costs of higher education for yourself or a dependent. The Hope Credit and the Lifetime Learning Credit are two education credits available which may benefit you. Because they are credits rather than deductions, you may be able to subtract them in full, dollar for dollar, from your federal income tax.

The Hope Credit

• The credit applies for the first two years of post-secondary education, such as college or vocational school. It does not apply to the third, fourth, or higher years of undergraduate programs, to graduate programs, or to professional-level programs. After your first two years you are entitled to take the lifetime learning credit.
  
• It can be worth up to $1,800 ($3,600 if a student in a Midwestern disaster area) per eligible student, per year.
• You're allowed a credit of 100% of the first $1,200 ($2,400 if a student in a Midwestern disaster area) of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,200 ($2,400 if a student in a Midwestern disaster area).
• Each student must be enrolled at least half-time for at least one academic period which began during the year.
• The student must be free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year. Basically, no drug convictions.
  

The Lifetime Learning Credit

• The credit applies to undergraduate, graduate and professional degree courses, including instruction to acquire or improve job skills, regardless of the number of years in the program.
• If you qualify, your credit equals 20% (40% if a student in a Midwestern disaster area) of the first $10,000 of post-secondary tuition and fees you pay during the year, for a maximum credit of $2,000 ($4,000 if a student in a Midwestern disaster area) per tax return.

You cannot claim both the Hope and Lifetime Learning Credits for the same student in the same year. You also cannot claim either credit if you claim a tuition and fees deduction for the same student in the same year. To qualify for either credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit.

As with almost every good credit, These credits are phased out for Modified Adjusted Gross Income over $48,000 ($96,000 for married filing jointly) and eliminated completely for Modified Adjusted Gross Income of $58,000 or more ($116,000 for married filing jointly). If the taxpayer is married, the credit may be claimed only on a joint return.

Talk with your NY Accountant come tax time so that you take full advantage of the tax savings these credits provide.