DEDUCTIBLE CHARITABLE DONATION REQUIREMENTS

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Individuals and businesses making deductible contributions to charity need to be aware of the charitable deduction requirements.    To be deductible, donations of clothing and household items 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.

To deduct any donation of money, by cash, check, electronic funds transfer, credit card or payroll deduction, a taxpayer must have a written bank record, pay stub or other written communication from the charity and/or employer showing the name of the charity, the pledge amount, and the date and amount of the contribution.  The taxpayer is also required to obtain an acknowledgment from a charity for each deductible donation of $250 or more.

To help taxpayers , a recent IRS announcement offers the following additional reminders:

• Contributions are deductible in the year made. Donations charged to a credit card before the end of 2012 count for 2012.  Likewise, checks count for 2012 as long as they are mailed in 2012.
• You need to check that the organization is qualified. Only donations to qualified organizations are tax-deductible.  The IRS maintains a searchable online database listing most organizations that are qualified to receive deductible contributions. In addition, most churches, synagogues, schools and government agencies are eligible to receive deductible donations, even if they are not listed in the database.
• For individuals, only taxpayers who itemize their deductions can claim deductions for charitable contributions.
• For all donations of property, including clothing and household items, you should get from the charity, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property.
• Your deduction for a motor vehicle, boat or airplane which you donate to charity, and which is intended to be sold by the charity, is generally limited to the gross proceeds of the sale.
• If the amount of your deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be attached to your tax return.
• It is important to keep good records and receipts.

 If you have any questions about the charitable deduction requirements, please call or email me at 937-223-1130 or Jsenney@pselaw.com.

 AND ONE MORE THING.  The IRS has recently released a changed  Voluntary Classification Settlement Program.  Whether a worker is an independent contractor or employee is determined by whether the company he works for has the right to control and direct him regarding the job he is to do and how he is to do the job.  Multiple factors are used to determine if a worker is an employee or contractor.  Section 530 of the 1978 Revenue Act provides relief from employment tax liability for employers who misclassified workers as independent contractors. But under Section 530, this relief applies only if:

1. The taxpayer does not treat the worker in question or any similarly situated worker as an employee for any period;
2. all federal returns required to be filed by the taxpayer with respect to the worker for such period are filed on a basis  consistent with the taxpayer's treatment of the worker as a nonemployee; and
3. The taxpayer had a “reasonable basis” (such as a court case or IRS rulings, a past IRS audit, or a long-standing practice of a significant segment of the relevant industry) for not treating the worker as an employee.

The IRS had previously instituted a Program granting relief to taxpayers based on the Section 530 requirements. The IRS has now issued an Announcement granting relief to taxpayers that didn't qualify for the Program solely because they had not filed all required Forms 1099.  In addition, the IRS recently amended the Program eligibility requirements to: (1) allow a taxpayer under IRS audit (other than an employment tax audit) to be eligible to participate in the program; and (2); eliminate the requirement that a taxpayer agree to extend the statute of limitations for employment taxes in order to participate in the program.

If you are interested in learning more about the Voluntary Classification Settlement Program or have questions about how to correctly classify workers for employment tax purposes, please call or email me at 937-223-1130 or Jsenney@pselaw.com.