Charitable giving and tax reform

/0 Comments/in /by

I saw several predictions from various sources that charitable organizations would suffer greatly from the tax reform act. Because of the large increases to standard deductions in the tax reform act, far less taxpayers are itemizing deductions. Therefore the prediction was that since less people would get a tax benefit from charitable deductions that many would stop donating to charities.

I have always believed that people donated to charity because they cared about the particular cause they were supporting and not because of the tax deduction. According to a survey by the Blackbaud Institute, apparently I was right. Although far less taxpayers benefited from charitable deductions, overall charitable giving increased by roughly 1.5% according to their data.

Many people are very confused when it comes to tax law and believe that anything that lowers their tax liability must be a good thing. Let me briefly explain how a taxpayer benefits from a charitable contribution. Let’s assume that Tommy Taxhater is single and makes over 500,000 in income and is in the top tax bracket of 37%. If he already has enough deductions to benefit from itemizing deductions, an additional 10,000 donation to a qualified charity would save him 3,700 in federal taxes. (10,000 x 37%) What a great deal. Tommy just paid 10,000 for a 3,700 dollar benefit. If Tommy is passionate about the charity and wants to give them 10,000 then he gets to support the charity of his choice and also as a bonus he gets a tax deduction, but donating solely for a tax deduction makes no sense.

If you happen to know anyone who still insists on doing things solely because they are tax deductible, I would be happy to direct them to a number of local charities that could make good use of however much they would like to donate.

Another judge rules to hold the IRS accountable

/0 Comments/in /by

Despite attempts by the IRS, many politicians, and the media to pretend that the tea party targeting scandal did not occur, lawsuits from groups affected by the illegal behavior of the IRS are still continuing.  Judge Reggie B. Walton recently ruled in favor of some of these groups and ordered the IRS to produce more records relating to who was involved and how the scandal occurred.  For more details on how the scandal evolved see here.

Summer Time tax tip

/0 Comments/in /by

Many clients grumble if they owe taxes at the end of the year.  Now is a good time to do a quick mid-year checkup to see if you are having enough taxes paid in through withholding or quarterly payments.  Here’s a link to an IRS publication that discusses the issue.  If you need assistance in this area, we are here to help.

Scary IRS Notices

/0 Comments/in /by

No one likes getting mail from the IRS. In recent balance due notices sent by the IRS they are including a paragraph that says at the top in BOLD letters. Denial or Revocation of United States passport.  In December of 2015 congress passed the FAST act which includes a provision allowing for the revocation of a passport for a person with seriously delinquent tax debt.  There are various conditions that need to be met in order to meet the definition of “seriously delinquent tax debt.”  One of those provisions is that the tax debt must exceed 50,000.  Yet, I just got a notice for a client owing $142.64 that included that warning.  IRS notices can be confusing and difficult to understand.  If you need help dealing with an IRS notice you can get competent advice from a tax professional such as an Enrolled Agent to represent you before the IRS.

Former Congresswoman convicted of tax fraud

/0 Comments/in /by

Corrine Brown, who had represented her district in Florida for nearly 25 years, has been convicted of tax fraud and other charges in connection with a “charity” allegedly set up to provide scholarships to underprivileged youth.  Out of more than 800,000 raised for the “charity”, one scholarship was awarded of $1,200.  Large amounts of the donations were deposited into her personal accounts and those of her associates.  Sometimes tax cheaters get caught.  If you have any questions regarding the tax obligations of legitimate charities, contact a competent tax professional such as an Enrolled Agent or CPA.

Tax break for pet owners?

/0 Comments/in /by

I can’t tell you how many times over the years I have been asked if veterinary costs are deductible for your pets.  Well, a bill has now been introduced in California that would give a tax credit of 50% of costs for vet bills for your pet cat or dog.  AB 942 was introduced last month.  Roads and bridges all over the state are crumbling from the recent storm damage, the state is facing severe funding shortages for pensions but at least pet owners may have something to smile about if this bill passes.

Don’t believe everything you hear.

/0 Comments/in /by

This morning I was listening to a home improvement show on the radio and they spent several minutes explaining various tax credits available for doing certain home improvement projects related to energy efficiency.  Just one problem.  All of those credits expired on December 31, 2016.  There is still a credit available for installing solar systems, but the remainder of the energy related credits for hvac, insulation, windows etc. no longer exist.  Moral of the story: don’t get your tax advice from a salesman, instead rely on a competent tax professional such as an Enrolled Agent for your tax questions.

Trumps tax returns

/0 Comments/in /by

It seems that there is a certain group of people obsessed with the idea of obtaining Donald Trumps tax returns.  This group seems to have been reanimated last week when Rep Bill Pascrell (D-N.J.) wrote a letter to the chairman of the House Ways and Means Committee requesting that they use their authority to request Trumps returns and review them for potential conflicts of interest.  I have seen several articles claiming that congress has the authority to review and release confidential tax information without the taxpayers consent, but they are just plain wrong.

There are certain committees of congress that have the authority to review confidential tax information but not to release it without the written consent of the taxpayer or taxpayers involved.  Here’s the wording of IRC section 6103(f) which deals with the subject.

(f)Disclosure to Committees of Congress

(1)Committee on Ways and Means, Committee on Finance, and Joint Committee on Taxation

Upon written request from the chairman of the Committee on Ways and Means of the House of Representatives, the chairman of the Committee on Finance of the Senate, or the chairman of the Joint Committee on Taxation, the Secretary shall furnish such committee with any return or return information specified in such request, except that any return or return information which can be associated with, or otherwise identify, directly or indirectly, a particular taxpayer shall be furnished to such committee only when sitting in closed executive session unless such taxpayer otherwise consents in writing to such disclosure.