IRS – Page 2 – Robert T. Stevenson, P.C., CPA

The generosity of the American people is never more evident than during a disaster event. Houston has experienced widespread devastation as a result of Hurricane Harvey. In its aftermath, hundreds of relief funds are being set up and promoted to aid those impacted by the storm. You clearly want to help, so how do you ensure that your generous donation will not only benefit those in need but also be tax deductible?

Here are a few things to consider.

1. Verify Tax Exempt Status

Make sure your recipient organization has been granted 501(c)(3) tax exempt status by the Internal Revenue Service. These organizations have been established for charitable purposes and donations to them are tax deductible as allowed by law. They also are required to file annual tax returns reporting their charitable contribution income, their unrelated business taxable income, and their business expenses. These returns are available for public inspection, usually upon request. You can confirm an organization’s exempt status on the IRS website.

2. Get a Receipt

Organizations that are eligible to receive tax deductible donations are required to provide a receipt to donors for any gift of $250 or more. The receipt acknowledges the donation amount, the date of donation, the organization’s tax exempt status, and their tax ID number. You should obtain and keep the receipt as additional support for your tax deductible donation.

3. Be Wary of Crowdfunding

Crowdfunding sites such as GoFundMe or YouCaring are popular ways to raise money for various types of causes on social media. Since crowdfunding websites are open for use by anyone, many of the funding pages are not established by qualified charitable organizations. Before giving through such sites, do your homework to ensure that your support is going to a charitable organization with qualifying tax-exempt status.

4. Appreciated Securities

Consider donating appreciated stocks, bonds, or mutual funds to a charity or a donor advised fund. When you donate appreciated securities held longer than a year, you are able to deduct the fair market value of the security as a charitable contribution. This also avoids the capital gains tax because the security is being donated instead of being sold.

5. Autos and Boats Worth More Than $5,000

In most cases you will need a written appraisal, which will be attached to the return. You will also need a written acknowledgement from the donee organization which will include any proceeds from the disposition of the vehicle by the donee organization. This acknowledgement must also be attached to the return.

In addition, you will need a Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, from the donee organization. Most charities will use the Form 1098-C to fulfill the written acknowledgement requirement. And yes, you will attach the Form 1098-C to your tax return.

If you have additional tax questions, give me a call at (713) 785-8939. I’d love to hear from you.

Between now and April, I’ll use my blog to periodically answer client questions and spread awareness about some of the biggest tax issues that could affect your 2017 return. Let’s begin with a brief overview of three potential changes with large implications.

Health Care

The individual and employer health insurance mandates remain the law now that the Senate has rejected GOP proposals for a repeal of Obamacare. The Affordable Care Act remains in force unless and until changed by Congress. Uninsured individuals must pay a penalty tax if they don’t qualify for an exemption. Employers with 50 or more full-time employees but no affordable health plan owe a penalty tax if their employees opt to buy insurance on an exchange and qualify for the premium tax credit. Trump’s executive orders on Obamacare do not change the law, per the IRS. Don’t be surprised to see more exemptions to the individual mandate. There are several now.

Also, keep an eye out for a bipartisan plan with significant changes to Obamacare. A new proposal by the 30 plus members of the House’s Problem Solvers Caucus sets forth solutions intended to help stabilize the individual health insurance market. It includes two tax provisions: First, repeal of the 2.3% tax on medical device sales; second, an easing of the employer mandate so it would only apply to businesses with 500 or more employees, up significantly from the current 50-employee threshold. In addition, the 30 hour per week threshold to qualify as a full time employee would be hiked to 40 hours.

Identity Theft

The incidence of reported individual tax identity theft is on the decline, but an increase in business tax identity theft is causing concern. This occurs when fraudulent individuals file bogus corporate, payroll, or excise tax returns, Schedule K-1s, and others, using stolen tax ID numbers and claiming false tax refunds. The IRS has flagged 10,000 suspicious business tax returns filed thus far in 2017. To help alleviate the problem, the IRS is asking more from tax return preparers. Beginning next year, tax preparation software will be updated to require additional data, such as the name and Social Security number of the executive signing the return and the company’s payment and filing history. The IRS anticipates that these questions will help it identify suspicious returns. Be ready for this. This would become a requirement by way of an internal IRS administrative ruling.

Tax Reform

Tax reform is a priority in Congress, and GOP tax writers and their staff are busy working on a proposal to overhaul the federal tax system, which they expect to release after the August recess. In the meantime, those in the know are making the following forecast.

Will the business tax rate be cut to 15%? No. Despite President Trump’s promise to slash the current 35% corporate rate to 15%, this won’t fly with moderate congressional Republicans. There just aren’t enough revenue raisers to offset such a low rate, they argue, especially now that the projected savings from the repeal of Obamacare is no longer in the mix. GOP lawmakers will aim for a 20 to 25% rate in their plan which will also apply to owners of pass-through businesses such as partnerships and S Corporations and self-employed business owners, such as those filing on Schedule C with their personal tax return.

If you have tax questions, I’d love to hear from you. Feel free to call me at (713) 785-8939 or email me at robert@robertstevensoncpa.com – I may even feature your question in a future blog post.

Until next time,
Robert Stevenson, CPA

Tag: IRS

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