Six IRS Tips for Year-End Gifts to Charity

Many people give to charity each year during the holiday season.  Remember, if you want to claim a tax deduction for your gifts, you must itemize your deductions.  There are several tax rules that you should know about before you give.  Here are six tips from the IRS that you should keep in mind:

1. Qualified charities.  You can only deduct gifts you give to qualified charities.  Use the IRS Select Check tool (http://1.usa.gov/1xSbJks) to see if the group you give to is qualified.  Remember that you can deduct donations you give to churches, synagogues, temples, mosques and government agencies.  This is true even if Select Check does not list them in its database.

2. Monetary donations.  Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction.  You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return.  This is true regardless of the amount of the gift.  The statement must show the name of the charity and the date and amount of the contribution.  Bank records include canceled checks or bank, credit union and credit card statements.  If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer.  It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.

3. Household goods.  Household items include furniture, furnishings, electronics, appliances and linens.  If you donate clothing and household items to charity they generally must be in at least good used condition to claim a tax deduction.  If you claim a deduction of over $500 for an item it doesn't have to meet this standard ifyou include a qualified appraisal of the item with your tax return.

4. Records required.  You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more.  Additional rules apply to the statement for gifts of that amount.  This statement is in addition to the records required for deducting cash gifts.  However, one statement with all of the required information may meet both requirements.

5. Year-end gifts.  You can deduct contributions in the year you make them.  If you charge your gift to a credit card before the end of the year it will count for 2014.  This is true even if you don't pay the credit card bill until 2015.  Also, a check will count for 2014 as long as you mail it in 2014.

6. Special rules.  Special rules apply if you give a car, boat or airplane to charity.  Give us a call if you have questions navigating special rules or we can be of assistance with any other year-end planning.

 

Tax Tips if You're Starting a Business

If you plan to start a new business, or you've just opened your doors, it is important for you to know your federal tax responsibilities.  Here are five basic tips from the IRS that can help you get started.

1. Type of Business.  Early on, you will need to decide the type of business you are going to establish.  The most common types are sole proprietorship, partnership, corporation, S corporation and Limited Liability Company.  Each type reports its business activity on a different federal tax form.

2. Types of Taxes.  The type of business you run usually determines the type of taxes you pay.  The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.

3. Employer Identification Number.  A business often needs to get a federal EIN for tax purposes.  Check IRS.gov to find out whether you need this number.  If you do, you can apply for an EIN online.

4. Recordkeeping.  Keeping good records will help you when it's time to file your business tax forms at the end of the year.  They help track deductible expenses and support all the items you report on your tax return.  Good records will also help you monitor your business' progress and prepare your financial statements.  You may choose any recordkeeping system that clearly shows your income and expenses.

5. Accounting Method.  Each taxpayer must also use a consistent accounting method, which is a set of rules that determine when to report income and expenses.  The most common are the cash method and accrual method.  Under the cash method, you normally report income in the year you receive it and deduct expenses in the year you pay them.  Under the accrual method, you generally report income in the year you earn it and deduct expenses in the year you incur them.  This is true even if you receive the income or pay the expenses in a future year.