It's tax season: Do it right! Do it on time!


Tax season is here and once again, you're probably trying to make sure that every penny counts in your favor. In this article, you will find some material to help you achieve that by filing your charitable contributions carefully. Your donations clearly have done positive work through entities that make an effort to contribute to society. Therefore, the IRS looks at your charitable efforts as a weight lifted off their shoulders. 

For this reason, you should take some time to make sure you're filing your taxes counting all the qualiying donations that you made. Please educate yourselves since it is important to follow tax laws very carefully. This article is dedicated to our donors who migh benefit from this information. We had several donations made on 2017 and we hope that your tax preparation this year si simple and fast.

Ten things to consider:


Itemization. Form 1040 requires you to itemize your contributions. Thi is a requirement. We recommend you to keep a record of your donations in order to make this easy. Lines 16-19 in Form 1040 are the ones assigned to charitable contributions.

Choosing carefully. You can ONLY include donations to qualified charitable institutions. If you're not sure if an organization is qualified, ask a copy of their letter from the Internal Revenue Service (IRS). Several organizations display their letters on their website. You can also search directly through the IRS website in the Exempt Organization Finder or through a common third-party evaluator site such as Charity Navigator. Remember that religious organization are charitable by nature (of course, check for exceptions).

Collect receipts for every contribution. Even if you will not have to submit documentation with your submission, a well-organized set or receipts is necessary in case of an audit. This is a great practice for any kind of donation. Remember that there probably is a paper trail for every transaction. However, always back up every cash donation claim with receipts. 

Payroll deductions? Many employees rely on charitable giving directly through their employer. The total amount widheld should be given to you by your employer as well as the pledge card that shows the name of the charity. The Pension Protection Act is the document that you should look at if this is the case. For federal workers, a pledge card with the name of a Combined Federal Campaign will meet these requirements. 

Computing the value of any incentives. A charitable donation is deductible ONLY for the charitable portion of any donation. If you receive anything in return for the donation, you must compute its cost in your presentation. For example, if you give $25 and in return, you receive a t-shirt, you MUST ask the entity the value of the item. If the t-shirt value is $10, then you can only declare $15 in your favor. Most charitable organizations will do this for you and present you a document with the value of your donation.

Donating appreciated assets? Property that has appreciated in value (such as stock) can benefit you double if donated away. If you are donating a property the you owned for more than a year, you can deduct its fair market value plus you avoid paying capital gains tax. Typically, appreciated property is subject to capital gains tax, however, there's an exception for donations to charitable organizations.

Your time doesnt count. Volunteering is honorable but it is not computable in the eyes of the IRS. However, expenses out of pocket relating to volunteering are deductible so long as they're not reimbursed or considered personal in nature. Some examples are: the cost of transportation (including parking fees and tolls); travel expenses; uniforms; and supplies used to perform your services. Keep a very good record of everything since documentation is crucial.

Gifts count!  Non-cash items count in your favor as charitable donations. Documenting the fair market value of an item is key. You must be able to substantiate the value of your donation. There are many ways to do it but the important part is that you establish an appropriate value. If self-documenting the donation because it's less than $500, be specific and keep records with the description and condition of the items. Gifts above the $5,000 mark require to posess a written appraisal of the property's fair market value. Take a look at Form 8283 if you want file taxes with gifts (non-cash contributions) especially the ones that go beyond  $500.

Understanding your limits. This is the complex part of charitable contributions. The simplified versions is this: to give, you must first have. The IRS uses  the Adjusted Gross Income (AGI) as the central elment to compute how much you can contribute. AGI can be found on line 37 of Form 1040. If you are contributing beyond the 20% of your AGI, you must pay attention to limits. Speciffic limitations can be quite complicated. Those are some of the basics: you can deduct apprciated capital gains uo to 20% of your AGI; non-cash assets can go up to 30% of your AGI. Cash contributions must stay under the 50% mark. Exceeding limits can result in carryovers. Please always check with an accountant or a Tax Preparation Agent.

Timing... The rule is simple: donations count from Jan 01st to Dec 31st. In some cases you will find that a donation is techically made on a year but it was not cashed out until the following year. This is often the case for checks or donations via cellphones. Those scenarios are valid if the charge was captured by year end.


 Did you find this useful? How about a contribution to Ascoltando inc. - tax deduction elegible.

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