Tips for Charitable Contributions
By Ashley Straatmann, CPA
Making contributions to charities is not only a wonderful way to help and support your community, but many individuals may be able to realize tax benefits as well. For taxpayers who itemize their deductions on their individual tax returns, a deduction can be claimed for contributions made to qualified charities. In order to claim these deductions, however, certain records must be maintained.
A donor must have a bank record or written statement from the charity in order to deduct any donation of money on their tax return, regardless of the amount. The record should include the name of the charity, the date of the donation, and the amount contributed. Bank records include cancelled checks, bank statements, or credit card statements. If contributions are made to a charity through payroll deductions, the taxpayer should retain a pay stub, W-2, or wage statement from their employer showing the amount withheld, as well as the pledge card
showing the charity’s name.
If a donor makes a charitable contribution of $250 or more (either monetary or nonmonetary), they must obtain a written acknowledgement from the charity to be able to deduct the contribution on their tax return. The written acknowledgement should include the charity’s name, amount contributed, description of any nonmonetary items contributed, and a statement regarding the value of any goods or services provided by the charity to the donor (or a statement that no goods or services were provided in return for the contribution). The written acknowledgement must be obtained before the filing of the donor’s tax return claiming the deduction.
Contributions of nonmonetary items, such as clothing and household items, are also eligible for tax deductions. These items generally must be in good used condition or better to qualify. Donors should obtain a receipt from the charity that includes the name of the charity, the date of the donation, and a description of the donated property. Special rules apply to donations of cars, boats, or airplanes.
Generally, a taxpayer’s deduction for charitable contributions is reduced by the fair market value of goods or services they received from the organization. For example, if a donor gives a charitable organization $100 and receives a concert ticket valued at $40 in return, the donor’s tax deduction will be limited to $60. The charity must provide the donor with a disclosure statement anytime a donor makes a payment to them in excess of $75 that is partly a contribution and partly for goods or services provided.
Many people make contributions to charities toward the end of the year, and may be unsure of the year the deduction should be taken. A charitable contribution paid with a credit card is deductible in the year it is charged to the card, not necessarily the year the credit card bill is paid. A contribution made with a check is deductible in the year the check is mailed, regardless of whether it is cashed before year-end.
Hopefully the above information is helpful when making a contribution.
As a business owner we all know that it is difficult to recruit and retain quality employees. Having a company retirement plan may help in some instances to keep employees. Some of the more common retirement plans are a SEP, SIMPLE, Defined Benefit, and 401(k) Plans. Below is a link to the chart explaining some of the provisions of each of these four plans.
Whether or not you decide to establish a plan and what kind requires an analysis of many factors. There are numerous variations on qualified plans that work in different situations. We can help you explore the options and help you come to a decision that is right for you.
New Overtime Rules
The new overtime rules will go into effect on December 1, 2016. The weekly salary increased from $455 to $913, or an annual salary of $47,476. In addition to meeting the salary requirement, the employee must still meet the job duties requirement which remain unchanged.
For more information on the new rules, please see our prior newsletter or give us a call.
Records Retention Schedule
To view the Records Retention Schedule click on the link below.
Wire Transfer Scam
The latest fraud scam has to do with scammers e-mailing employees and asking them to do a wire transfer. The e-mail is supposedly sent from the employee’s boss and/or supervisor with just one letter of the e-mail address changed. They state that the wire transfer is a rush and must be done immediately. If the person who receives the e-mail is not able to contact the boss and/or supervisor due to them being on vacation or out of the office, the employee may complete the transaction due to the urgency of the notice.
The wire in some cases is sent to a bank in the United States, which makes it look legitimate. But as soon as the money is transferred into the account, the scammer transfers it on to an account in a foreign country.
Steps need to be taken to avoid potentially losing thousands of dollars with this scheme, such as:
- Wire transfers can only be authorized through a phone call.
- Wire transfers can never be done on a Friday (a popular day with scammers).
- Wire transfers for more than a specified amount must be personally verified by the bank.
- Wire transfers must be authorized by two individuals.
For more ideas on how to avoid being a victim, please contact us.