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 2012? 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, 2012
| Girls'Shirts | Good | |||
| Women's Blouses | Very Good | |||
| Men's Winter Jackets | Very Good | |||
| Women's Slacks | Excellent | |||
| Children's Wind Breakers | Very Good | |||
| Electric Blanket | Very Good | |||
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.
• 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:
- • How you obtained the property (e.g. purchase gift, inheritance);
- • The date you obtained the property; and
- • 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, CPAs
2013 Tax Chart
EXEMPTIONS AND OTHER ITEMS TIED TO INFLATION
© Copyright 2013 E. Martin Davidoff (U.S.A.) |
2013 |
2012 |
1. Personal Exemptions |
$3,900 |
$3,800 |
2. Standard Deduction |
|
|
Single |
6,100 |
5,950 |
Head of Household |
8,950 |
8,700 |
Married |
12,200 |
11,900 |
Dependents |
1,000 |
950 |
3. Tax Rates |
|
|
Single |
|
|
10% Bracket |
0 - 8,925 |
0 - 8,700 |
15% Bracket |
8,925 - 36,250 |
8,700 - 35,350 |
25% Bracket |
36,250 - 87,850 |
35,350 - 85,650 |
28% Bracket |
87,850 - 183,250 |
85,650 - 178,650 |
33% Bracket |
183,250 - 398,350 |
178,650 - 388,350 |
35% Bracket |
398,350 - 400,000 |
above 388,350 |
39.6% Bracket |
above 400,000 |
N/A |
Married |
|
|
10% Bracket |
0 - 17,850 |
0 - 17,400 |
15% Bracket |
17,850 - 72,500 |
17,400 - 70,700 |
25% Bracket |
72,500 - 146,400 |
70,700 - 142,700 |
28% Bracket |
146,400 - 223,050 |
142,700 - 217,450 |
33% Bracket |
223,050 - 398,350 |
217,450 - 388,350 |
35% Bracket |
398,350 - 450,000 |
above 388,350 |
39.6% Bracket |
above 450,000 |
N/A |
4. Phaseout Range for Exemptions |
300,000 - 422,500 |
N/A |
5. 3% Phaseout of Itemized Deductions |
300,000 |
N/A |
6. Standard Mileage Rate |
56.5¢ |
55.5¢ |
7. 401(k) Employee Contribution Limit |
17,500 |
17,000 |
8. Annual Gift Tax Exclusion |
14,000 |
13,000 |
9. Flexible Spending Account (FSA) Limit - Health |
2,500 |
No Cap |
|
||
2013 |
2012 |
|
OASDI Wage Base - 6.20% / 4.2% |
$113,700 |
$110,100 |
HI Wage Base - 1.45% |
NO CAP |
NO CAP |
© Copyright 2013 E. Martin Davidoff (U.S.A.) All Rights Reserved
IRS Expands Threshold for Streamlined Installment Agreements
IRS Expands Threshold for Streamlined Installment Agreements
2/10/12
by E Martin Davidoff, CPA, Esq.
The IRS now allows for streamlined installment agreements for taxpayers owing up to $50,000. We succeeded in doing this over the phone for a taxpayer who actually owed $53,000 (but less than $50,000 had been assessed, the remainder was accrued interest and penalties). The IRS has produced Form 9465-FS to allow you to gather the information. Before you call, you should fill out the form to have the answers ready for the IRS person on the other end of the phone. In our example, we were able to get an installment agreement for $605 per month without the IRS filing any further liens (we are still uncertain if they will withdraw the existing liens after a 3-month trial that the direct debits are being accepted, but we will try.)
Although the IRS does request very basic financial information (i.e. net pay, car payments, mortgage payments), no documentation is required to be provided! They are just making sure that the taxes will be fully paid, presumably over a 72-month period (although we figured in our example it would take longer, even though the IRS employee seemed to say they were figuring it over 72 months).
The entire process, from first meeting with the client, assessing their best course of action, getting the IRS on the phone, and securing the agreement, took less than 2 hours! This is a fraction of the time (and cost) from when we had to provide detailed financial information for those owing more than $25,000. This expansion of the streamlining from $25,000 to $50,000 will be a great benefit to taxpayers if the IRS administers the program with consistency.
Here are some helpful links on the topic:
http://www.irs.gov/pub/irs-pdf/f9465fs.pdf
http://www.irs.treas.gov/pub/foia/ig/sbse/sbse_05-0112-013.pdf
I hope you find this information helpful. If you need any further information on this new policy, please don't hesitate to contact me.