E. Martin Davidoff & Associates

TAX INFO & UPDATES

The following are recent tax laws, tools, and information that we hope you will find useful. If you have any further questions regarding this helpful tax information, please do not hesitate to contact our office.

 

Charitable Contributions

CHARITABLE CONTRIBUTIONS


Did you make any cash or noncash charitable contributions in 2015?  If so, it is very important that you complete the appropriate pages of your tax organizer.  In addition, the following discussion outlines general record keeping requirements for charitable contributions and identifies what information we will need in order to properly deduct the contributions on your tax return.


Many of our clients make significant noncash charitable contributions such as clothing and household items. For all charitable contributions of Clothing or Household Items, the provisions provide that no deduction is allowed to an individual, partnership or S corporation for these items unless the items are in good used condition or better.  This rule does not apply to a single item that is donated with a value of $500 or more if a qualified appraisal with respect to the property is included with the tax return. For these noncash contributions, a detailed listing of the contributed items and related "thrift shop" fair market values is needed, such as in the example below,in addition to the written acknowledgment.

If you would like us to prepare this list for you, please complete the information in the tax organizer and/or attach sheets as needed that provide us with the following information:


1. Name and address of the charitable organization;
2. The date of the contribution; and
3. A list of what was contributed (# of items, description and condition as in the example below).

If you wish to reduce the amount of time and billing that you will incur by our office for preparing these detailed lists, please feel free to provide us with lists that you have prepared.  We suggest that you use the following format:


Mr. & Mrs. John Doe
SS# 555-55-5555 and 555-55-5555
Charitable Contributions
The Salvation Army
123 Scott Road, Edison, NJ 55555
Donated on October 10, 2014

# of
Items

Description

Condition
F.M.V.
Per Item

Total
3
 Girls'Shirts Good
$ 8
$ 24
10
 Women's Blouses Very Good
$12
$120
2
 Men's Winter Jackets Very Good
$ 25
$ 50
9
 Women's Slacks Excellent
$ 12
$108
2
 Children's Wind Breakers Very Good
$ 11
$ 22
1
 Electric Blanket Very Good
$ 24
$ 24
TOTAL
$348

There are several resources available that may assist you in properly preparing a list and valuing the items that you have donated:


• The Salvation Army provides a "Valuation Guide for Items Donated to the Salvation  Army" and Goodwill provides a guide as well. They can be found at the links just below and could also be used as a thrift value guide for donations to other organizations.

Salvation Army Valuation Guide

Goodwill Donation Value Guide

• For more information on Charitable Contributions, please refer to Form 8283 and its instructions. Other informative links containing a tremendous amount of useful information on Charitable Contributions are  IRS Publication 526-Charitable Contributions, and IRS Publication 561-Determining the Value of Donated Property.


Donation of Vehicles, Boat or Plane:

Effective  January 1, 2005, if the claimed value of the donated motor vehicle, boat or plane exceeds $500 and the item is sold by the charitable organization, the taxpayer's deduction is limited to the lesser of the gross proceeds from the sale or the fair market value at the time of the gift.  Under the new rules, the charitable organization must provide an acknowledgment to the donor within 30 days of the sale stating the amount of gross proceeds, which must be attached to the return. Alternatively, if the charity significantly uses or materially improves the vehicle(s), the charity must certify this intended use and duration and provide an acknowledgment to the donor within 30 days of the contribution, which must be attached to the return.  If the charity significantly uses or materially improves the vehicle, generally, the donor may deduct the vehicle's fair market value at the time of the gift.  This is in keeping with the old treatment and you may wish to seek a charity who will use the vehicle in this manner to ensure a deduction for full fair market value.


Donor Advised Funds:

Effective February 14, 2007, you cannot deduct a contribution to a Donor Advised Fund (Charitable Gift Fund) if the sponsoring organization is a war veteran's organization, a fraternal society, or a nonprofit cemetery company.


Substantiation Requirements for Charitable Contributions:

Effective for tax years beginning after August 17, 2006, no deduction will be allowed for cash contributions, regardless of the amount, unless the taxpayer has  either (1) bank records such as a cancelled check or account statement or (2) written acknowledgment from the charity documenting the contribution amount and date. Please note that under the old law, cash contributions of less than $250 could be substantiated with "reliable records," which could include something other than bank records or donee acknowledgment.


For cash contributions, you should retain the canceled check(s) or account statement(s) showing the name of the organization, the date of the contribution and the amount of the contribution.


For charitable contributions of $250 or more, one is required to obtain a contemporaneous (as explained below) written acknowledgment from the donee prior to filing one's tax returns in order to take the deduction. Please provide us with copies of written acknowledgment(s) and/or appraisal(s).


1.  Written Acknowledgment:


  The written acknowledgment must include the following information:


  • • The amount of cash and/or a reasonably detailed description, but not necessarily the value, of any noncash property contributed;

  • • Whether the recipient organization provided any goods or services in consideration for any property contributed;

  • • If goods and services were provided as described in item (b) above, a description of those goods and services and a good faith estimate of the value of such goods and services.  If the goods and services provided to the donor consisted solely of intangible religious benefits, a statement to that effect should be included.  The receipt of intangible religious benefits does not reduce the amount of the charitable contribution.

  • • The term "intangible religious benefit" means any intangible religious benefit which is provided by an organization organized exclusively for religious purposes and which is not sold in a commercial transaction outside of the donative context (e.g. admission to a religious ceremony);

  • • The name of the charitable organization; and

  • • The date and location (for noncash contributions) of the charitable contribution.

2.  Contemporaneous Requirement:


Substantiation is contemporaneous for the purposes of this written requirement if the taxpayer obtains the acknowledgment on or before the earlier of:


  • • The date the taxpayer filed a return for the taxable year in which the contribution was made,
            or
  • • The due date (including extensions) for filing such returns.


Substantiation need not be acquired by the taxpayer if the charitable organization files, in accordance with Treasury regulations, an information return which includes the contents of the written acknowledgment set forth above.


For noncash charitable contributions over $500, but not more than $5,000, your records must also include the following:


  1. • How you obtained the property (e.g. purchase gift, inheritance);
  2. • The date you obtained the property; and
  3. • The cost or other basis of the property.


For noncash charitable contributions over $5,000, generally, you must obtain a qualified written appraisal of the donated property from a qualified appraiser and complete Schedule B of Form 8283.  You should retain the appraiser's written report with your records.


Please do not hesitate to contact our office with any questions that you may have.

Prepared by E. Martin Davidoff & Associates, Certified Public Accountants, LLC

2016 Tax Chart


2016 CHANGES IN TAX RATES, PAYROLL TAX RATES,

EXEMPTIONS AND OTHER ITEMS TIED TO INFLATION

© Copyright 2016 E. Martin Davidoff (U.S.A.)
2015
2016
1. Personal Exemptions
$4,000
$4,050
2. Standard Deduction

 

 
      Single
6,300
6,300
     Head of Household
9,250
9,300
      Married
12,600
12,600
      Dependents
1,050
1,050
3. Tax Rates

 

 
     Single

 

 
          10% Bracket
0 - 9,225
0 - 9,275
          15% Bracket
9,225 - 37,450
9,275 - 37,650
          25% Bracket
37,450 - 90,750
37,650 - 91,150
          28% Bracket
90,750 - 189,300
91,150 - 190,150
          33% Bracket
189,300 - 411,500
190,150 - 413,350
          35% Bracket
411,500 - 413,200
413,350 - 415,050
          39.6% Bracket
above 413,200
above 415,050
      Married

 

 
          10% Bracket
0 - 18,450
0 - 18,550
          15% Bracket
18,450 - 74,900
18,550 - 75,300
          25% Bracket
74,900 - 151,200
75,300 - 151,900
          28% Bracket
151,200 - 230,450
151,900 - 231,450
          33% Bracket
230,450 - 411,500
231,450 - 413,350
          35% Bracket
411,500 - 464,850
413,350 - 466,950
          39.6% Bracket
above 464,850
above 466,950
4. Phaseout Range for Exemptions
     (married filing joint)
309,900 - 432,400
311,300 - 433,800
5. 3% Phaseout of Itemized Deductions
      commence at
309,900
311,300
6. Standard Mileage Rate
57.5˘
54˘
7. 401(k) Employee Contribution Limit
18,000
18,000
8. Annual Gift Tax Exclusion
14,000
14,000
9. Flexible Spending Account (FSA) Limit - Health
2,550
2,550

Under the Federal Insurance Contribution's Act (FICA), an employer is required to withhold social security taxes from wages and also make a contribution. The Employer tax rate of withholding is 7.65%, which consists of a 6.2% component for old age, survivors, and disability insurance ("OASDI") and a 1.45% component for hospital insurance ("HI" also known as Medicare). Taxable Medicare wages paid in excess of $200,000 ($250,000 Jointly) are subject to an extra 0.9% Medicare tax. Below are the OASDI and HI wage bases for 2015 and 2016.

 
2015
2016
OASDI Wage Base - 6.20%
$118,500
$118,500
HI Wage Base - 1.45%
NO CAP
NO CAP

"800" number for Social Security Administration

Toll Free 1-800-772-1213

Weekdays 7 a.m. to 7 p.m.


© Copyright 2016 E. Martin Davidoff (U.S.A.) All Rights Reserved

New IRS Program - Installment Agrement Optimization Deviation

New IRS Program - Installment Agreement Optimization Deviation


On September 6, 2016 the IRS began piloting a new collection program, Installment Agreement Optimization Deviation. This allows an individual Taxpayer with an assessed balance up to $100,000 to full pay their balance due within 84 months or within the collection statute of limitation s, whichever is less. If the Taxpayer agrees to have their equal monthly installment agreement payments directly debited from their bank account, no financial disclosure will be required. If the Taxpayer selects any other method of payment, a financial disclosure will be required as described in the IRS Internal Revenue Manual §5.19.13.1, subject to minimal IRS verification. As with any installment agreement, the Taxpayer must be in current compliance, with all required tax returns filed and current year estimated tax payments made. Additionally, the Taxpayer must certify that they will continue to be compliant throughout the installment agreement period. The agreement would still require manager approval and the Taxpayer could still be subject to a Federal Tax Lien filing.


Please note that the Installment Agreement Optimization Deviati on is only available for accounts in Automated Collection Status (ACS) or with Campus Operations. It is not a vailable for accounts that are in the field or with Accounts Management. Furthermore, this is a 13-month trial through September 30, 2017. After that, the IRS will evaluate the effectiveness of the program. Prior to the launch of the Installment Agreement Optimization Deviation, the only similar relief for Taxpayers was under the Fresh Start Initiative, which allowed a Taxpayer with an as sessed balance due under $50,000 to full pay their liability within 72 months. For an assessed balance due over $50,000, a Taxpayer would be required to complete a full financial disclosure in order for the IRS to consider any other relief or means of resolution.


If you think that you could benefit from this new program or ha ve questions regarding tax issues, we strongly encourage you to call our office.