What to consider in December about tax law changes
Individual Tax Changes
Like most things in life, it seems everybody has an opinion about what makes a good accountant. Different people have different expectations about how the relationship would go. You could compile a list of the attributes you’re looking for and find an accountant who matches those. However, be aware, particularly if you have never worked with an accountant before, that your expectations many not work in reality. We decided to ask our clients why they would recommend us. Here’s what they said.
1) Interested in you, not just your paperwork
You’re a human, not a bunch of numbers. While you don’t need to be friends with your accountant, relating human to human allows for potentially more pleasant interaction. In our practice, we often find potential deductions in small talk and bringing each other up to date in our lives.
2) Keeps promises and lets you know when can’t
As humans, we sometimes commit to a project or deadline only to realize it is different from what we expected. We inform the client as quickly as possible to make new arrangements based on our new knowledge.
3) Knowledgeable of issues surrounding taxes
This may seem obvious. While no accountant knows everything and will have to research issues to help clients, someone with experience and a track record will come from a more solid base than someone who is newer in the field. If you’re talking to someone who is relatively inexperienced, ask about his/her support.
4) Referred by someone you trust
We certainly get plenty of clients who find us via our website or somewhere else online. The clients that we do meet by referral tend to be easier to break the ice with due to a common trusted relationship.
5) Thinks outside the box
This was something our clients referred to repeatedly. While some tax related issues are black and white, many are in what we call ‘the gray area.’ When we meet with clients who are switching accountants, we commonly uncover deductions the previous accountant did not.
6) Looks at your entire life, not just what you came to see him/her about
We ask a lot of questions. Most people lead busy complex lives. We want to know as much as possible to uncover anything that might lower a balance due or increase a refund.
7) Works with a wide range of diverse situations
Several clients commented that their tax situation had changed a lot over the years and we were always able to meet their challenges. Even if we have more than one client working in a particular industry, each situation will be unique.
8) Is available and responsive to your needs
We are available to our clients year round. And generally, we can schedule appointments pretty quickly. Even when we’re on vacation, our office manager knows how to get in touch with us if a client has an emergency.
9) Willing to take the time to train you to make your taxes simpler for you
We see a wide variety of taxpayer solutions to tracking their tax situations, often ideas we never would have thought can be extremely helpful. This is what we share with our clients, solutions which make taxes easier for them.
10) Calculates what you might owe, if you want an extension of time to file
The IRS considers payment “late” if not submitted by the April deadline – even if you go for a six-month extension. Our familiarity with the range of tax filings allows us to interpolate what you need to pay with your extension to avoid an IRS Failure To Pay Penalty
We hope this list of ideas helps you to find the best accountant for your personal finances or small business.
Little-known IRS Rules for Charitable Donations – Part 2
6 – Specific Rules for Non-USA Contributions:
While contributions to qualified Canadian, Mexican and Israeli non-profits are allowed, they are allowed only if you have at least that amount of non-USA income from that specific country. No other foreign contributions are allowed, even, for example, the Catholic Church of Ghana.
7 – December 31 Contributions Are Permitted, Even If 12-31 Is Your Mailing Date:
Obviously, we hope, the check must clear your bank within a reasonable period of time, lest abuse take place. This also applies to 12-31 contribution made by credit card, which would often be paid much later — on the due date of the credit card billing.
8 – Premiums Paid for 50-Yard -Line Seats, If Paid Separately, Are A Contribution:
Football fans sometimes reserve box seats or great seats in advance, through an alumni association. While the tickets themselves are not deductible, currently the premium for great seating is considered a contribution.
9 – Hosting Exchange Student Through Qualified Organization:
The IRS allows up to $50.00 per month as a tax deduction, and a month is defined to include at least 15 days of any calendar month.
10 – Donation of Appreciated Property:
As long as you have held the property at least 12 months, the deduction is equal to the appreciated value. However if the property is held less than 12 months, your deduction is limited to your cost. One example of the latter would be a newspaper editor who is often sent newly published books (who was told by H & R Block that he could deduct them at the price inside the book jacket.) However, unless he held those books for a full year, his actual deduction would be ZERO. Further, year-old newly published books would likely be worth significantly less than the book jacket price.
11 – Operating Animal Rescue Support From Home:
Assuming you are working with a qualified non-profit such the Old English Sheepdog Rescue shown below, food and supplies are deductible:
OES Rescue of Southern California, Inc., a 501(c)(3) non-profit rescue of volunteers places 2-6 Old English Sheepdogs per month. The average age of our rescue dogs is 3 years. Our “area” of rescue includes Fresno to the north, the California state line to the east, San Diego to the south, and the Pacific Ocean to the west. We also cover parts of Arizona and Southern Nevada. We provide a packet of OES breed information and/or rescue information upon request.
There is one caution, however. If an individual expense exceeds $250.00 — such as a vet bill — some communication between you and the rescue operation must acknowledge that payment of the vet bill will be considered by the organization as a contribution in order to meet the IRS requirement of timely receipts for contributions of $250.00 or more. The vet bill is not enough, since the vet will ordinarily not be a qualified 501(c)(3) non-profit.
Today we’re going to share with you a few little-known IRS rules as they apply to Charitable Donations and how, when properly applied within IRS guidelines, they can assist in offsetting some of our tax liability. Knowing the rules can greatly assist in one’s tax planning and management.
We’ll be sharing 11 tips total and due to the complexity of some, will break this post into a few parts for ease of attention.
Donations: Charity Maximization & Limitations
This was a topic we pursued in several sessions at the Annual IRS Nationwide Tax Forum over at National Harbor. Most of us are familiar with the general rules regarding donations; here’s some of the finer points in areas that can show up unexpectedly or for which we are generally not prepared:
1 – Clothes in a Drop Box – No Receipt:
As long as the total fair market value of what you donated results from a list you made, and you show the date and full address of the drop box as well as the qualified charity’s name and full street address, a receipt is not necessary. However, donations of $250 or more do require the receipt. Hence this deduction is limited to $249.99 for each drop off.
2 – Donation Left Out for Pick Up – No Receipt Left On Door:
We hear about this once a year, and from time to time it is a problem we have ourselves. This answer below comes from the Goodwill website:
Goodwill receives hundreds of thousands of donations a year thanks to the community’s incredible generosity. Unfortunately, Goodwill is unable to replace your donation receipt if it is lost or stolen.
However, federal tax guidelines may allow you to receive a tax write-off even if you do not have your receipt. In the place of your donation receipt, please itemize your donated items, place a value on those donated items, and include the date of your location.
Here’s the tax law which backs that up:
Receipts are critical to good book-keeping and tax returns. But if you can’t find one, contrary to popular belief, you are not out of luck. Remember the Cohan Rule, from a still good today tax case called Cohan v. Commissioner. George M. Cohan was a Broadway pioneer with hits like “Give My Regards to Broadway” and “Yankee Doodle Boy.” His statue still commands Times Square if you look amid all the hubbub.
In the 1920s, the IRS disallowed Cohan’s (very large) travel and entertainment expenses for lack of receipts. He was a flashy guy and tended to pay in cash. And he wasn’t going to take no for an answer. So when the IRS denied all his deductions, he took the IRS to court. Receipts being the stock in trade of the tax system, the trial court upheld the IRS. Again, Mr. Cohan wouldn’t take no for an answer and appealed to the Second Circuit.
3 – Donation of In-Season Week of Vacation Rental for Charity Auction:
There is a good news-bad news report. From time to time the IRS gets arbitrary and capricious when applying its general rules to specific circumstances, and this is one of those times. Currently the donation of a vacation rental to charity is considered a “partial interest” donation and therefore not allowed. The only “good news” is that when the IRS takes such a firm stand that basically goes “against the grain”, within a few years the Tax Courts over rule the position, as the next item shows quite clearly.
For now forget expecting a tax deduction for the donation of the use of your vacation rental.
4 – Annual Summary of Donations Over $250.00 Each Is Now Adequate:
Just a few years ago the IRS was arbitrary and capricious with regard to “contemporaneous” acknowledgements of donations over $250.00 each, demanding multiple timely sent letters from the same charity if multiple donations over $250.00 each were made during one year. In 2016 that was changed.
“Contemporaneous” now means “by the date you sign the tax return listing that donation”, which could be as late as October 15th of the following year if you file using the full time allotted to an extension of the due date – or as early as you might actually file your taxes. And one letter acknowledging all donations is now considered adequate.
5 – Direct IRA Transfers Are Allowed:
This is also brand new. The PATH Act of 2015 permits those over 70 ½ to instruct their IRA management service to send them or their charity a check made out to the charity, giving you the full amount of the contribution without your ever paying income tax on the money in your IRA.
Do not make the mistake of having the check made out to you first. That ruins it all.
More in our next post…