WASHINGTON — The Internal Revenue Service today reminds individual taxpayers who are considering buying a new car that they have until Dec. 31 to take advantage of a tax break that may not be around in 2010.
Thursday, December 17, 2009
Tuesday, December 8, 2009
State of Arizona Credit for School Donation
I came across some excellent questions and answers on the AZ. School Tax Credit and thought I would list them below.
Remember, this is an excellent dollar for dollar credit against any Arizona Tax Liablity you have. If the credit exceeds your tax liability, it will carry forward for 5 years.
What school tax credits are available to individuals?
An individual may claim a credit for making
contributions or paying fees to a public school for
support of extra curricular activities or character
education programs. An individual may also claim a
credit for making a donation to a qualified school tuition
organization for scholarships to private schools.
Who may claim the individual school tax credits?
The individual school tax credits are available only to
individuals. Partnerships and S corporations cannot pass
these credits through to their partners or shareholders.
These credits are also not available to trusts, estates,
regular corporations, or S corporations.
Can a taxpayer claim both credits in the same
taxable year?
Yes.
Must a taxpayer have a child in school in order to
claim one or both of these credits?
No.
Is a charter school considered to be a public school
or a private school?
A charter school is defined in ARS §15-101 as a public
school. Therefore, a charter school is eligible for the credit
for contributions made or fees paid to a public school to
support extracurricular activities or character education.
What do I have to do to qualify for this credit?
To qualify for the credit you must make cash contributions
or pay fees to a public school for support of extra
curricular activities or for character education programs.
Will I qualify for the credit if I pay fees for my own
child to participate in an extra curricular activity or
character education program?
Yes, fees that you pay for your own child to participate
in an extra curricular activity or character education
program qualify for the credit.
Do contributions I make to the school qualify for
the credit?
Yes, if the contributions are in support of extra
curricular activities or a character education program.
What is the maximum dollar amount of the credit?
The credit is equal to the amount contributed or the
amount of fees paid. However, for single taxpayers or
heads of household, the credit cannot exceed $200. For
married taxpayers that file a joint return, the credit
cannot exceed $400. If married taxpayers file separate
returns, each spouse may claim 1/2 of the credit that
would have been allowed on a joint return.
What public schools and grades are eligible for
the credit?
Public schools and charter schools that provide
instruction in grades kindergarten through 12 are
eligible for the credit. Nongovernmental schools, preschools,
community colleges, and universities do not
qualify for the credit.
What is the maximum dollar amount of the credit for Private School Tuition?
The credit is equal to the amount contributed. However,
for single taxpayers or heads of household, the credit
cannot exceed $500. For married taxpayers that file a joint
return, the credit cannot exceed $1,000. If married
taxpayers file separate returns, each spouse may claim
only 1/2 of the credit that would have been allowed on the
joint return.
What is a school tuition organization?
A school tuition organization is one that is tax exempt
under Section 501(c)(3) of the Internal Revenue Code,
allocates at least 90 percent of its annual revenue to
scholarships or grants, and makes its scholarships/grants
available to students of more than one qualified school.
Remember, a Private school must be Qualified by the state, be sure to check if your donation will be accepted for the credit.
For a List of Qualified School Organizations in Az. click on link below.
www.azdor.gov/LinkClick.aspx?fileticket=HZtBZXHPWRA%3d&tabid=114
Remember, this is an excellent dollar for dollar credit against any Arizona Tax Liablity you have. If the credit exceeds your tax liability, it will carry forward for 5 years.
What school tax credits are available to individuals?
An individual may claim a credit for making
contributions or paying fees to a public school for
support of extra curricular activities or character
education programs. An individual may also claim a
credit for making a donation to a qualified school tuition
organization for scholarships to private schools.
Who may claim the individual school tax credits?
The individual school tax credits are available only to
individuals. Partnerships and S corporations cannot pass
these credits through to their partners or shareholders.
These credits are also not available to trusts, estates,
regular corporations, or S corporations.
Can a taxpayer claim both credits in the same
taxable year?
Yes.
Must a taxpayer have a child in school in order to
claim one or both of these credits?
No.
Is a charter school considered to be a public school
or a private school?
A charter school is defined in ARS §15-101 as a public
school. Therefore, a charter school is eligible for the credit
for contributions made or fees paid to a public school to
support extracurricular activities or character education.
What do I have to do to qualify for this credit?
To qualify for the credit you must make cash contributions
or pay fees to a public school for support of extra
curricular activities or for character education programs.
Will I qualify for the credit if I pay fees for my own
child to participate in an extra curricular activity or
character education program?
Yes, fees that you pay for your own child to participate
in an extra curricular activity or character education
program qualify for the credit.
Do contributions I make to the school qualify for
the credit?
Yes, if the contributions are in support of extra
curricular activities or a character education program.
What is the maximum dollar amount of the credit?
The credit is equal to the amount contributed or the
amount of fees paid. However, for single taxpayers or
heads of household, the credit cannot exceed $200. For
married taxpayers that file a joint return, the credit
cannot exceed $400. If married taxpayers file separate
returns, each spouse may claim 1/2 of the credit that
would have been allowed on a joint return.
What public schools and grades are eligible for
the credit?
Public schools and charter schools that provide
instruction in grades kindergarten through 12 are
eligible for the credit. Nongovernmental schools, preschools,
community colleges, and universities do not
qualify for the credit.
What is the maximum dollar amount of the credit for Private School Tuition?
The credit is equal to the amount contributed. However,
for single taxpayers or heads of household, the credit
cannot exceed $500. For married taxpayers that file a joint
return, the credit cannot exceed $1,000. If married
taxpayers file separate returns, each spouse may claim
only 1/2 of the credit that would have been allowed on the
joint return.
What is a school tuition organization?
A school tuition organization is one that is tax exempt
under Section 501(c)(3) of the Internal Revenue Code,
allocates at least 90 percent of its annual revenue to
scholarships or grants, and makes its scholarships/grants
available to students of more than one qualified school.
Remember, a Private school must be Qualified by the state, be sure to check if your donation will be accepted for the credit.
For a List of Qualified School Organizations in Az. click on link below.
www.azdor.gov/LinkClick.aspx?fileticket=HZtBZXHPWRA%3d&tabid=114
YEAR END CHARITABLE DONATION UPDATES
Since it is year end, and the Christmas Season, many people have two priorities at the top of their list.
1. Maximizing their deductions AND
2. Bringing joy to others and helping our fellow man.
Charitable Contributions are a way to do both at once.
If you can itemize, one of the best deductions left is Charitable Contributions.
I am going to do two or three posts about Charitable Contributions. The first is a relatively new opportunity and may not last long. That is the:
Special Charitable Contributions for Certain IRA Owners
This provision, currently scheduled to expire at the end of 2009, offers older owners of individual retirement accounts (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity.
This option, created in 2006, is available for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.
To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the transfer.
Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.
Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. Of course the Required Minimum distribution has been deferred for tax year 2009, but this is an excellent time to get the money out of those IRA's TAX FREE.
Many retirees do not necessarily need their IRA money at this time and do not want to take the distribution out of their IRA, because it then becomes taxable, and even worse, it makes more of their Social Security taxable.
This is a perfect avenue to take the money out TAX FREE. You do not get to deduct the donation, HOWEVER, you don't have to pay tax on the distribution, and it doesn't increase your taxable income. That in itself will probably outweigh the tax deduction that you forego.
This provision was actually supposed to end December of 2008 and Congress extended it for one more year. Whether they will extend it again or not will remain to be seen.
Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions.
Sincerely, Deborah Sherwood, EA
1. Maximizing their deductions AND
2. Bringing joy to others and helping our fellow man.
Charitable Contributions are a way to do both at once.
If you can itemize, one of the best deductions left is Charitable Contributions.
I am going to do two or three posts about Charitable Contributions. The first is a relatively new opportunity and may not last long. That is the:
Special Charitable Contributions for Certain IRA Owners
This provision, currently scheduled to expire at the end of 2009, offers older owners of individual retirement accounts (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity.
This option, created in 2006, is available for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.
To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the transfer.
Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.
Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. Of course the Required Minimum distribution has been deferred for tax year 2009, but this is an excellent time to get the money out of those IRA's TAX FREE.
Many retirees do not necessarily need their IRA money at this time and do not want to take the distribution out of their IRA, because it then becomes taxable, and even worse, it makes more of their Social Security taxable.
This is a perfect avenue to take the money out TAX FREE. You do not get to deduct the donation, HOWEVER, you don't have to pay tax on the distribution, and it doesn't increase your taxable income. That in itself will probably outweigh the tax deduction that you forego.
This provision was actually supposed to end December of 2008 and Congress extended it for one more year. Whether they will extend it again or not will remain to be seen.
Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions.
Sincerely, Deborah Sherwood, EA
Guidelines for Monetary Donations
To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.
Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.
Reminders
To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders:
Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2009 count for 2009. This is true even if the credit card bill isn’t paid until 2010. Also, checks count for 2009 as long as they are mailed in 2009 and clear, shortly thereafter.
Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.
For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2009 Form 1040 Schedule A, available now on IRS.gov, to determine whether itemizing is better than claiming the standard deduction.
The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.
Charitable Donations can lift your Christmas spirtis, by helping our fellow men and you get the added benefit of a possibly a larger refund this year.
Sincerely, Deborah Sherwood, EA
Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.
Reminders
To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders:
Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2009 count for 2009. This is true even if the credit card bill isn’t paid until 2010. Also, checks count for 2009 as long as they are mailed in 2009 and clear, shortly thereafter.
Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.
For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2009 Form 1040 Schedule A, available now on IRS.gov, to determine whether itemizing is better than claiming the standard deduction.
The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.
Charitable Donations can lift your Christmas spirtis, by helping our fellow men and you get the added benefit of a possibly a larger refund this year.
Sincerely, Deborah Sherwood, EA
Rules for Donating Clothing and Household Items
To be deductible, clothing and household items donated to charity generally must be in good used condition or better.
A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances and linens.
A receipt from the Charitable Organization is A MUST, so don't just drop off the "goods" and expect to take the donation.
IRS is even getting more strict on HOW you must document these items. The following rules apply to charitable donation receipts:
1. The name of the Charitable Organizaion must be listed on the Receipt
2. The date and location of the contribution
3. A description of (but not necessarily a value for) the property "in detail
reasonably sufficient under the circumstances". The charity must write this description in
Also on any receipt with a donation value of $250 or more, the Charity need to include the statement "no goods or services were rendered in return for the donation"
Taking pictures of the goods before giving them away, is also very helpful.
This may seem like a lot of useless work, however, the Charitable Contribution is one of the few really good deductions we have left, and it is well worth the effort.
Charities are notorious for not giving receipts. It is easy for people just to dump the bags at the drop off, but I think we need to make those charities conduct business in the proper manner to help all involved.
Below is a link to Salvation Army, open it up then click on "Donation Value Guide". This is a great tool for valuing the items you donate.
www.satruck.org
Also, for Charitable Planning use this link: http://www.pgdc.com/host/planned-giving-design-center-llc/overview
On our website www.sherwoodqualitytax.com, if you will click on the "Links" tab at the bottom of the page, there is a whole page of unique links to find helpful information.
Sincerely, Deborah Sherwood, EA
A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances and linens.
A receipt from the Charitable Organization is A MUST, so don't just drop off the "goods" and expect to take the donation.
IRS is even getting more strict on HOW you must document these items. The following rules apply to charitable donation receipts:
1. The name of the Charitable Organizaion must be listed on the Receipt
2. The date and location of the contribution
3. A description of (but not necessarily a value for) the property "in detail
reasonably sufficient under the circumstances". The charity must write this description in
Also on any receipt with a donation value of $250 or more, the Charity need to include the statement "no goods or services were rendered in return for the donation"
Taking pictures of the goods before giving them away, is also very helpful.
This may seem like a lot of useless work, however, the Charitable Contribution is one of the few really good deductions we have left, and it is well worth the effort.
Charities are notorious for not giving receipts. It is easy for people just to dump the bags at the drop off, but I think we need to make those charities conduct business in the proper manner to help all involved.
Below is a link to Salvation Army, open it up then click on "Donation Value Guide". This is a great tool for valuing the items you donate.
www.satruck.org
Also, for Charitable Planning use this link: http://www.pgdc.com/host/planned-giving-design-center-llc/overview
On our website www.sherwoodqualitytax.com, if you will click on the "Links" tab at the bottom of the page, there is a whole page of unique links to find helpful information.
Sincerely, Deborah Sherwood, EA
Monday, December 7, 2009
Audits for Employer Issues Coming SOON!!!
IRS has formed a special division, JUST FOR EMPLOYMENT ISSUES. They have been training their staff in this specialty and NOW:
* * NRP Employment Tax Audits to Begin in February 2010 * *
In February 2010, the IRS will begin its first Employment Tax National Research Project (ET NRP). Business practices regarding employment tax issues may have changed significantly over the last 25 years since the last IRS employment tax study in the 1980s.
Examinations comprising the study will be conducted to collect data that will allow the IRS to understand the compliance characteristics of employment tax filers. The results will allow the IRS to gauge more accurately the extent to which businesses properly comply with employment tax law and related reporting requirements.
When completed, this information will help the IRS select and audit future employment tax returns with the greatest compliance risk.
There are two main goals:
• To secure statistically valid information for computing the Employment Tax Gap (ie. find out how bad the abuse is and catch those employers paying CASH wages and/or claiming employees as independent contractors), and
• To determine compliance characteristics so IRS can focus on the most noncompliant employment tax areas. (in other words find out where the majority of Employers are breaking the rules and zero in on those areas for more widespread audits).
The IRS will randomly select 2,000 taxpayers each year for the next three years. The examinations will be comprehensive in scope.
Records pertaining to employment tax returns and issues will be subject to review during these examinations. Employers should have all of their records available to expedite these examinations.
My suggestion, if you are not claiming full or part time employees as wage earners instead of subcontract labor, you may want to clean up your act!
Remember, IRS and the States are BROKE, they are looking for money from ANY source they can find, and this issue has been abused for so long, they are going to push it to the max!
If you have concerns in this area, and would like more information on whether your worker is an employee or an independent contractor, give us a call!! OR better yet, send me an email debbie.sherwoodquality@yahoo.com.
Sincerely, Deborah Sherwood, EA
* * NRP Employment Tax Audits to Begin in February 2010 * *
In February 2010, the IRS will begin its first Employment Tax National Research Project (ET NRP). Business practices regarding employment tax issues may have changed significantly over the last 25 years since the last IRS employment tax study in the 1980s.
Examinations comprising the study will be conducted to collect data that will allow the IRS to understand the compliance characteristics of employment tax filers. The results will allow the IRS to gauge more accurately the extent to which businesses properly comply with employment tax law and related reporting requirements.
When completed, this information will help the IRS select and audit future employment tax returns with the greatest compliance risk.
There are two main goals:
• To secure statistically valid information for computing the Employment Tax Gap (ie. find out how bad the abuse is and catch those employers paying CASH wages and/or claiming employees as independent contractors), and
• To determine compliance characteristics so IRS can focus on the most noncompliant employment tax areas. (in other words find out where the majority of Employers are breaking the rules and zero in on those areas for more widespread audits).
The IRS will randomly select 2,000 taxpayers each year for the next three years. The examinations will be comprehensive in scope.
Records pertaining to employment tax returns and issues will be subject to review during these examinations. Employers should have all of their records available to expedite these examinations.
My suggestion, if you are not claiming full or part time employees as wage earners instead of subcontract labor, you may want to clean up your act!
Remember, IRS and the States are BROKE, they are looking for money from ANY source they can find, and this issue has been abused for so long, they are going to push it to the max!
If you have concerns in this area, and would like more information on whether your worker is an employee or an independent contractor, give us a call!! OR better yet, send me an email debbie.sherwoodquality@yahoo.com.
Sincerely, Deborah Sherwood, EA
Friday, December 4, 2009
Standard Mileage Rate CHANGES for 2010
Instead of using the business portion of the actual expenses of operating a vehicle, the IRS permits taxpayers to use a standard mileage rate. (But don't forget...you STILL have to keep track of the different KIND of mileages...business, charitable, medical, personal etc.
IRS has issued new standard mileage rates effective for travel on or after January 1, 2010.
Business mileage rate is 50 cents per mile (down from the 55 cents per mile for 2009); 23 cents per mile is the depreciation component (up from 21 cents per mile for 2009).
Charitable rate is 14 cents per mile and is set by Congress therefore does not change until Congress makes such a change.
Medical and moving rate is 16.5 (down from the 24 cents per mile for 2009).
From the downward drop of the mileage rates, you would think that IRS is planning on the gas prices and the vehicle prices to drop. THAT would be great!!!!....but don't hold your breath!
We hope you have a wonderful Christmas!
Tax season is coming soon, can't wait to visit with you!!
IRS has issued new standard mileage rates effective for travel on or after January 1, 2010.
Business mileage rate is 50 cents per mile (down from the 55 cents per mile for 2009); 23 cents per mile is the depreciation component (up from 21 cents per mile for 2009).
Charitable rate is 14 cents per mile and is set by Congress therefore does not change until Congress makes such a change.
Medical and moving rate is 16.5 (down from the 24 cents per mile for 2009).
From the downward drop of the mileage rates, you would think that IRS is planning on the gas prices and the vehicle prices to drop. THAT would be great!!!!....but don't hold your breath!
We hope you have a wonderful Christmas!
Tax season is coming soon, can't wait to visit with you!!
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