Part II Tips : Substantiating Tax Deductions for Charitable Contributions

Bradford Tax Institute
The Bradford Tax Institute is one of the many sources we network with to stay on top of all the latest changes and updates to tax code and laws.

KEEP GOOD RECORDS!

When you give to charity, you win twice, first by supporting good organizations, and second by claiming valuable tax deductions. We leave the choice of charitable entity to you, and instead focus on record-keeping practices that maximize your charitable contribution deductions. To deduct cash, check or other charitable gifts, keep bank records or written communication from the charity showing

  • the name of the charitable organization,
  • the date of the contribution, and
  • the amount of the contribution.

For a detailed guide on record-keeping based on amount and type of charitable contribution, see the table at the end of this article.

Personal v. Business Deductions

Personal charitable deductions alleviate your tax burden and add to your bottom-line. However, business deductions are more valuable than personal charitable deductions.

Thus, whenever you have a choice between a business and a personal deduction, go for the business deduction.

For example, with a business deduction on Schedule C of your Form 1040, you save both self-employment taxes, and phaseout taxes caused by a multitude of AGI limits.

If you operate as a corporation, you gain with charity payments as business expenses because you are using pre-tax money for the charity rather than after tax deductions.

Here’s one corporate owner example. Say you are going to give $10,000 to a charity. If you earn the money on a W-2 in your capacity as an owner-employee, you pay payroll taxes on the earnings before you can give the $10,000 to the charity. On the other hand, if your corporation can claim the $10,000 payment to this charity as a business expense, you avoid the payroll taxes and either you (if you are an S corporation) or the corporation (C corporation) gets the deduction.

Souce: Bradford Tax Institute

Pat Michael and his team at US-TaxLaws is your best source for professional tax preparation services with more than 30 years experience and thousands of satisfied clients.
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Part I : Tips Substantiating Tax Deductions for Charitable Contributions

SUBSTANTIATING CHARITABLE CONTRIBUTIONS

Larger IRSMany charitable organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with section 170. Most eligible organizations are listed in Exempt Organizations Select Check (Pub 78 database). Continue reading →

Communicating Your Child Care Business Policies

Child Care Tax Specialists

SHOULD YOU CREATE A  POLICY HANDBOOK FOR YOUR CHILD CARE BUSINESS?  ABSOLUTELY!

It is your responsibility to communicate your policies in your business.  Clients will appreciate the information, and creates a basis of communication between you and the client.  It establishes how you conduct your business, and gives parents an “inside look” of what to expect in your performance.  It also lets them know what is expected of them.  To learn more about what to include in your handbook,  see Communicating Your Child Care Business Policies

 

 

 

 

 

 

 

When Should Child Care Professionals Raise Their Rates?

January 29 Header for ChildCare Site

Does talking about rate increases with your client make you uncomfortable?

Child Care Tax SpecialistsYou’re not alone.  Many child care providers feel awkward talking about rates and fee increases with their clients.  However, just as many of your clients get annual reviews and increases in their job-related compensation, it isn’t unreasonable for you to need to adjust your rates if only to meet inflation.

Read HOW and WHEN TO RAISE YOUR RATES

 

IRS Releases the “Dirty Dozen” Tax Scams for 2014

Identity Theft, Phone Scams Lead List

IR-2014-16, Feb. 19, 2014

Larger IRSWASHINGTON — The Internal Revenue Service today issued its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

“Taxpayers should be on the lookout for tax scams using the IRS name,” said IRS Commissioner John Koskinen. “These schemes jump every year at tax time. Scams can be sophisticated and take many different forms. We urge people to protect themselves and use caution when viewing e-mails, receiving telephone calls or getting advice on tax issues.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

Continue reading →

How to Deduct Expenses at the NAFCC Conference in Orlando, Florida

January 29 Header for ChildCare Site

 

Follow IRS rules about business travel and deductions and enjoy the trip!

Are you planning to attend the National Association for Family Child Care Conference in Orlando, Florida on July 11-12, 2014?  The program guide  gives you all the details about workshops and seminars that will be taking place, including valuable business practices for record keeping and general business administration of your child care business.

WHAT’S EVEN BETTER – YOU HAVE DEDUCTIONS!

Want to read more?  Click Here

DID YOU KNOW that your vacation home can be a tax deduction?

uh oh signJust make sure you don’t use it for client or business entertainment.  

The Bradford Tax Institute had a great piece about how you can actually deduct your vacation home – as long as you don’t break the rule.  The rule is – it can’t be used for your business client’s (or their family’s) entertainment.

BTI used the scenario – Man owns three-acre beachfront property.  While he is there, he met with his investment advisors, current and prospective clients and met with salesmen, trainees and other partners in his business.

The costs associated with these meetings are all legitimate deductions and valid business activities, so where did he go wrong?

He permitted his clients to bring their family to the property, while they were in meetings. The court ruled that since the *family members* did not attend the business meetings – that meant they were entertaining themselves, such as playing on the beach or going out at night and partying.

As a result, the court ruled that the beach home was a NONDEDUCTIBLE ENTERTAINMENT FACILITY.  (See http://www.law.cornell.edu/uscode/text/26/274 )

The Bradford Tax Institute used the following example:  If you use your vacation home 11 days for business meetings with your employees (or partners, etc.), 14 days for business lodging, and 8 days for personal purposes, that gives you 76% business use and 24% personal use.  Formula:  25 business days (M-F) divided by 33 days = 76%.  You can deduct 76% of the operating costs and depreciation of your vacation home.

 

Story source:  Bradford Tax Institute Tax Reduction Letter

 

Want Affordable Care coverage beginning March 1? Plan now for best results.

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Consumers are applying and enrolling in quality, affordable health coverage every day using HealthCare.gov and State-based Marketplaces around the country. More than 3 million have enrolled so far, and we hope millions more will do so by March 31, the end of open enrollment.

From Saturday February 15, 2014 at 3:00PM until Tuesday, February 18, 2014 at 5:00AM EST, the Social Security Administration will conduct required, regularly scheduled systems maintenance activities over the three day weekend. During this period, verification of Social Security Numbers and other related data via the Data Services Hub will be unavailable. All other services of the Hub will be functioning as normal.

What this means for you:

If you have already completed your application and know what you qualify for: This doesn’t affect you — you can continue shopping and pick a plan to finish your enrollment.

If you want coverage effective March 1, 2014: You generally need to sign up by February 15. But, because of the maintenance window, you won’t be able to find out what you qualify for if you apply after 3pm that day. If you aren’t able to complete your enrollment online by February 15, call us at 1-800-318-2596 starting on February 18 to request coverage beginning on March 1. We will work with you to get you covered.

If you want coverage with a later effective date: You can complete your application during this time but won’t be able to find out what you qualify for during the maintenance period. When you complete your application, you’ll need to save it and return to HealthCare.gov on or after February 18 to find out what you qualify for, pick a plan, and complete your enrollment.

Remember, you have until March 31 to sign up for new coverage during this year’s open enrollment period.

https://www.healthcare.gov/blog/cancelled-plan-you-ve-got-coverage-options/

IRS Red Flag Scenarios

CAUTION Audit Alert SignTAXPAYER CLAIMS HE IS A WRITER…

A taxpayer was unable to prove his business deduction as a legitimate expense.  In 2006-2007 the taxpayer claimed his trips abroad were to take photographs for a book on world travel.  He deducted $20,000 for costs associated with his travels to Africa, Australia, Asia and South America.  He claimed he was a writer, but in 2011 he still had failed to publish anything – and the book was still in rough form.  It was decided that even though he had a business plan, and a profit motive, he failed to produce evidence that he was in a trade or business of being an author.  (¹Oros v. Comm. (December 31, 2013) US Court of Appeals for the Ninth District, Case No. 12-71071)

MBA TUITION DEDUCTION DENIED

Husband and wife were denied a major deduction of $17,138 for the husband’s MBA tuition expenses.  Why?  Because they could not provide evidence that the schooling was required for his employment.  Education expenses may be deducted if the education:

  1. Maintains or improves skills required by the individual’s employment; or
  2. It meets the requirements of the individual’s employer or the law, as a condition of employment.

 

Source of content : Spidell’s Elder Client Care Planner , March 2014

 

 

Pat Michael and his team at US-TaxLaws is your best source for professional tax preparation services with more than 30 years experience and thousands of satisfied clients.

Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation Corporate Tax Preparation  Incorporation-Choice of Entity   Business Support Services Corporate Compliance   Audit Representation  Retirement Tax Planning   Wills & Trusts Estate Planning   Bookkeeping   Payroll

 

CA Franchise Tax Board Warns Taxpayers About Scam

Franchise Tax Board, State of CA

For Immediate Release
tel  916.845.4800 | Public Affairs Office
cell 916.204.8026 | John Barrett
John.Barrett@ftb.ca.gov

(Sacramento)–With the tax season upon us, the Franchise Tax Board (FTB) is reminding taxpayers to be wary of theft ploys involving scammers attempting to mimic FTB to obtain access to your personal information. Continue reading →

Nonprofit Organizations Conducting Campaign Activity

CAUTION TAX FORMS NEEDED!REPORTING REQUIREMENTS SPOTLIGHT NAMES OF CONTRIBUTORS and AMOUNTS

Back on December 31 our post on What You Need to Know about NFP 501(c)(4) organizations outlined the changes, including a new definition in 501(c)(4) social welfare organizations.

Beginning January 1, 2014 the Government Code relating to campaign activity was amended to add reporting requirements for “reporting nonprofit organizations” that engage in campaign activity.

Government Code Section 54964.6 was added to require reporting nonprofit organizations – that engage in political activity – of specific amounts to:

  • File FTB 3589 with CA FTB and post on the nonprofit’s Internet website the identity and amount of each specific source or sources of funds it receives for campaign activity. (As of this posting, Form FTB 3589 is not available, and will not be available until 2015.  You should contact your tax professional or the Franchise Tax Board.)
  • Deposit into a separate bank account all “specific source or sources of funds” it receives.
  • Pay for all campaign activity from that separate bank account.
  • Provide a description of the campaign activity.
  • Report the identity and amount of payments the organization makes from the required separate bank account.

 

Medical and Dental Expense Deduction – FTB CA

 

FTB CAFederal changed the allowable medical and dental expense deduction amount for federal purposes. A deduction is allowed for unreimbursed allowable medical and dental expenses that exceed 10 percent of federal adjusted gross income (AGI) California allows a deduction for medical and dental expenses that exceed 7.5 percent of federal AGI. For more information, go to ftb.ca.gov and search for Schedule CA 540.

TRANSLATION:  If you have medical and dental expenses that exceed the 7.5% threshold in California, you will be able to claim these expenses under California Tax Law even if you don’t have enough  to meet the 10% federal threshold.

Tax information is not tax advice.  If you need your questions answered, call 619-589-8680 for an appointment.  Pat Michael and his team at US-TaxLaws.com  is your best source for professional tax preparation services with more than 30 years experience and thousands of satisfied clients.

Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation  Corporate Tax Preparation  Incorporation-Choice of Entity   Business Support Services  Corporate Compliance   Audit Representation  Retirement Tax Planning   Wills & Trusts   Estate Planning   Bookkeeping   Payroll

Flash – 2013 Short Sellers Get State Tax Relief

 

Franchise Tax Board, State of CAFranchise Tax Board of California 

We updated our website to include information about mortgage debt relief for taxpayers who sold their principal residences through a short sale in 2013.

According to an Internal Revenue Service (IRS) Information Letter dated September 19, 2013, the IRS determined that California taxpayers who sell their principal residences for less than what is owed on the home as part of a short sale, in which the lender agreed to the short sale, do not incur cancellation of indebtedness income. Instead, the amount of forgiven debt is included in the amount realized in determining gain on the sale of that residence.

The IRS guidance is limited to California short sales only. The IRS guidance did not specifically address other types of real estate transactions such as non-judicial foreclosures and mortgage loan modifications.

We will update information and FAQs on our website soon. For more details and updates, please go to ftb.ca.gov and search for mortgage forgiveness debt relief.

 

Pat Michael and his team at US-TaxLaws is your best source for professional tax preparation services with more than 30 years experience and thousands of satisfied clients.
Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation
Corporate Tax Preparation   Incorporation-Choice of Entity    Business Support Services    Corporate Compliance    Audit Representation   Retirement Tax Planning   Wills & Trusts   Estate Planning   Bookkeeping   Payroll 

How Safe Are Your Tax Records?

PROTECT YOUR RECORDS … FOR PEACE OF MIND

If you are using electronic records – stored remotely and retrievable – great!  But what about those who still keep paper records in a home-office, garage, basement, or attic?  Well, if you are going to keep your tax records in  your home, make sure they won’t be destroyed in an unexpected catastrophe like a fire or flood.  While the IRS isn’t heartless … if they come looking for your records, you will wish you have kept them safer. Continue reading →

Helping Your Widowed Parent With Legal and Financial Issues

A checklist for helping a surviving parent get organized.

  1. Find assets.
    Often, just one spouse manages most of a couple’s finances. Be sure that your surviving parent knows where important assets are located. Over time, you may find it helpful to make a master list of bank and brokerage accounts, retirement plans, insurance policies, real estate, items in safe deposit boxes, and other significant assets. Make note of sizeable debts as well.
  2. Collect insurance.
    Find out whether your surviving parent is the beneficiary of a life insurance policy and, if so, contact the insurance company and file a claim for benefits. This is one of the first things you can do to ensure there’s enough cash on hand.
  3. Apply for benefits.
    Helping your parent apply for Social Security benefits should be near the top of your list of things to do. Contact the Social Security Administration (www.ssa.gov) for information about survivor’s benefits. In addition, investigate other benefits to which your parent may be entitled, including pension, veterans, or other employment-related payouts.
  4. Change title to jointly owned assets.
    If your parents owned property together — as joint tenants or in another form of joint ownership — the survivor should change the title document to show that he or she now owns the property alone. This will make it easier for your surviving parent to manage the property — and for you to wrap up your surviving parent’s affairs when the time comes. Check title documents for real estate, vehicles, bank or brokerage accounts, and other significant assets to see whether you need to update ownership records.
  5. Update will and trusts.
    Losing a mate will more than likely cause your parent to reevaluate his or her own plans for leaving property at death. If your surviving parent has a will or living trust, you should eventually have him or her review it and change it, if necessary, to reflect your parent’s current life circumstances and wishes. Also take a look at who is named as beneficiary of retirement plans and any other major assets that will pass outside the will or trust.
  6. Take steps to avoid probate court.
    When changing title documents and reviewing your surviving parent’s estate plan, you should consider whether any part of the estate will be subject to probate when he or she dies. Simple probate avoidance methods could save a bundle of time and money — for example, your parent might name pay-on-death beneficiaries for a bank or brokerage accounts that used to be jointly owned.
  7. Update insurance policies.
    If your deceased parent is still named as a beneficiary on insurance policies, those policies will need to be modified, cashed out, or canceled, depending on your parent’s current needs and wishes.
  8. Make a health care directive (living will).
    If your parent hasn’t already prepared a living will and a durable power of attorney for health care, now is the time. These important documents will allow your parent to set out health care wishes and name a trusted person — perhaps you — to oversee his or her care and make medical decisions if that ever becomes necessary. Making health care documents can also open the door to discussing your parent’s feelings about organ donation, burial or cremation, and other final arrangements.For more information, seeHelping a Loved One Make a Power of Attorney.
  9. Make a financial power of attorney.
    This document lets your parent name someone to handle financial matters — from writing monthly checks to managing investments — if he or she ever becomes incapacitated and unable to take care of things alone. Without this document in hand, you or other loved ones would most likely have to go to court to get the necessary authority. For more information, see Helping an Elder Make a Power of Attorney.
  10. Organize documents.
    A world of careful planning won’t do any good if you can’t find important paperwork when you need it. Do what you can to help your mom or dad set up a good filing system. Here are some critical things to keep track of:
    – will, trust, and other estate planning documents
    – powers of attorney
    – bank and brokerage account statements
    – retirement plan statements
    – government benefit paperwork
    – insurance policies
    – business records
    – tax returns
    – credit card and debt information
    – secured places, such as a safe or safe deposit box
    – email accounts and passwords
    – property records for real estate, cars, and other major assets.

Source: NOLO 

Pat Michael and his team at US-TaxLaws is your best source for professional tax preparation services with more than 30 years experience and thousands of satisfied clients.

Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation
Corporate Tax Preparation  Incorporation-Choice of Entity   Business Support Services
Corporate Compliance   Audit Representation  Retirement Tax Planning   Wills & Trusts
Estate Planning   Bookkeeping   Payroll 

Net Investment Income Tax (NIIT) EA UPDATE

IRS Affordable Care Act Tax Provision WebsiteUPDATE: Funding the Affordable Care Act through NIIT

Want to know why it is a good idea to have an Enrolled Agent (EA) as your professional tax preparer?  They are “America’s Tax Experts®!” An EA can explain, in easy-to-understand language, how the new tax code will affect you and your taxes today, and help you plan for the future, The IRS is the *enforcement arm* for the Affordable Care Act Tax collection, and the laws and reporting requirements are changing almost daily.  You want someone who is looking out for you and your best interest (no pun intended).  Continue reading →