Posts Tagged ‘Charitable Donations’

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Fraudulent Charitable Organization Donation Scams

Wednesday, November 27th, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

Depending on your opinions regarding the adverse weather effects of “global warming”, globally we are continuing to see and experience extremes of weather conditions which are causing tremendous amounts of property damage, and significant numbers of deaths and injuries.  Often U. S. citizens feel compelled to make a donation to the humanitarian relief efforts to aid those victims and provide financial assistance.  The assumption that follows is that surely their donation must be to an IRS approved charitable organization, and that the donation can be deducted on their (personal  or business) tax returns for that year. 

However, this assumption could be incorrect.  IF you claim a deduction for a donation to an organization that has not been approved by the IRS, or for which the IRS has revoked their tax-exempt satus, you could subject your tax returns to an audit or review by the IRS.  Based on past experiences, these “tax scam” organizations may use one or more of the following schemes:

The scams use different tactics. Offering charity relief, criminals often:

  • Claim to be with real charities to gain public trust.
  • Use names which are very similar to legitimate charities.
  • Use email to steer people to bogus websites that often look like real charity sites.
  • Contact people by phone or email to get them to ‘donate’ money or give their financial information. 

 Before you may any donation, perform your own “due diligence” activities to confirm that you are sending your money to a bonafide charity.

1.  Go to the Internet, use your search engine, and verify the authenticity of the organization;

2.  Contact the Better Business Bureau (http://www.bbb.org/us/Find-Business-Reviews/) or (http://www.bbb.org/)

3.  Go to the IRS website (http://www.irs.gov) and use the “Exempt Organization Select Check” tool to locate bonafide charities.  Remember, the website may not have all of the latest organizations.  If you can not locate the one for which you are searching, call the IRS at 1-800-829-3676 or 1-800-829-1040. 

4.  If you can not satisfy yourself that the organization is a bonafide entity after completing steps #1-3 above, DO NOT make the donation!  It is most likely that it is a scam operation and that your donation will personally enrich one or more individual people. (more…)

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Charitable Contributions

Tuesday, March 22nd, 2011

The comments in this article are related to individual taxpayers.  In addition to requirements set forth in Publication 526 (“Charitable Contributions”) businesses  should also review the provisions of Publication 542 (“Corporations”), including page 13 of the latter  publication for annual contribution limitations.

The first step in this process should include a review of Publication 78 (“Approved Charities”) and Publication 526 to determine if the organization to which you have donated, or plan to donate to, is an approved “charitable organization.”   Be sure to keep accurate records and supporting documentation as required by the regulations.

Additonal considerations and requirements are provided in the publications for:

  • “Acceptable” organizations and “unacceptable” organizations (Table 1, page 2 of Publication 526).
  • Appreciated capital assets (stocks, bonds, jewelry, stamps, coins, art etc)  tax savings can be achieved if you meet the requirements and donate these assets using their fair market value.  You do not have to first sell the asset, pay the capital gains tax, and then donate the cash.  Be sure to review the “Unrelated Use” requirement on page 12.
  • There are additional special rules and requirements if you donate a vehicle, boat or airplane (pages 8-11).
  • The value of your time, regardless of the amount and value, is not deductible.
  • There are limitations on the total amount of all charitable donations that can be made each year.  It is based on your “Adjusted Gross Income” and the type of donation.  The percentage limits are 20%, 30%, and 50%  See pages 13-15.
  • If you have exceeded the annual limitation for any tax year, the unused amounts can be carried forward in your tax return for the next five future years, if necessary.

I have observed a recurring situation for some clients in which they can not take a tax deduction for a contribution due to the tax laws.  This situation occurs when someone at work, church etc is in need of assistance.  Friends and family step up to the plate and come to the rescue.  However, the recipient is not an approved charitable organization and the donations can not be claimed.  Solution – donate to an approved charitable organization in that person’s name and have the charitable organization deliver the donations.  (more…)

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Standard or Itemized Deductions??

Wednesday, March 10th, 2010

This is the time of year when most Americans are becoming more actively engaged in the preparation of their individual Federal income tax returns.  While there are not many options available for reporting income, there could be some opportunities to reduce your taxable income (and directly related income taxes) by carefully reviewing the instructions for the completion of Schedule A (Itemized Deductions) for Federal form 1040.  While there are variances from state to state, most states either allow the same deductions as provided by Federal laws or they require various adjustments.  You can obtain specific details for your Federal tax return deductions by reading the instructions for Schedule A  on the IRS website:  http://www.irs.gov/pub/irs-pdf/i1040sca.pdf 

There are seven major categories:  1)  Medical and Dental Expenses, 2) Taxes You Paid,  3) Interest You Paid, 4)  Gifts to Charity, 5) Casualty and Theft Losses, 6) Job Expenses and Miscellaneous Deductions, and 7) Other Miscellaneous Deductions.

You will only realize a tax benefit from those total medical expenses that are greater that 7 1/2% of your total income (Adjusted Gross Income).  There is a deduction for state and local income taxes for those states that do not have a state income tax (i.e. Florida and Texas).  If you have all of your receipts to document your deductions, you have the option to use either the amounts from the IRS tables or the actual total amount from your receipts.  Large ticket (cost) items such as cars, boats, airplanes, recreational vehicles, etc are additions to the IRS tables.  If you own a home, in addition to your mortgage interest don’t forget to deduct any points that were paid (this amount is usually provided on the Form 1098 that you receive from your mortgage company) plus Mortgage Insurance Premiums (PMI) paid for homes purchased after December 31, 2006.  PMI is required if you had less than 20% equity in your home when you purchased or re-financed it. 

If you and your spouse paid expenses jointly and are filing separate tax returns you should review IRS Publication 504 for guidance on the allocation of these expenses.  Additional information on itemizing deductions from the IRS follows: 

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Important Rules For Charitable Donations

Monday, August 24th, 2009

Every year taxpayers can not deduct some of the charitable donations that they have made in the previous year.  This situation is easily avoidable if they would just take a few minutes to read and understand the guidelines and requirements which have been set forth by the Internal Revenue Service.  It is important to note that the requirements have been increased in the past four years.  Among the most common problems are: 

1.    Making donations or contributions to an organization that is not listed in IRS Publication 78;

 2.  Responding to a friend, colleague, fellow employee, another church member etc for a  donation to a needy person or family.  However, these recipients are also not on the approved IRS list;

 3.  Failing to meet the requirements which are described in the IRS article below:

(more…)

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