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What tips should I keep in mind for year-end charitable giving?

In the last few weeks of the year, you may be considering final charitable giving contributions. Such year-end giving make sense, because there are many more giving options highlighted during the holidays to which one can make a qualifying charitable contributions and because it is the last chance during which you can give and have the gift count as a deduction on your 2014 income tax return.

If you are planning to make a year-end charitable contribution, there are several tax law changes you should keep in mind to be sure you are able to take full advantage of your gift from a tax standpoint.

Year-End Gifts

Charitable donations are deductible in the year in which they are made. Therefore, in order for a charitable gift to be deductible from a taxpayer’s 2014 income tax, the donation must be made by December 31, 2014.

The date of a charitable gift is when the funds leave your possession, which is either the date the funds are mailed or the date the funds are charged to your credit card or removed from your bank account.

Charitable Contributions of Non-Monetary Household Items, Including Clothing

When you make a donation of non-monetary household items or clothing, including furniture, electronics, appliances, and other similar items, the items must be in good condition to qualify as a deduction for income tax purposes. If the items are not in working conditions or are damaged, you cannot claim a charitable deduction.

However, if the item is worth $500 or more, the item does not have to be in good or working condition if you obtain an appraisal that supports the value of the item. In addition, if the items are worth more than $250, the taxpayer must obtain a written receipt from the charity that describes the items donated.

Charitable Contributions of Money

For any charitable donation of money, the taxpayer must obtain a bank record or other written statement with the amount contributed, the name of the charity, and the date of the contribution. This requirement applies for any monetary donation, regardless of how small.

Charitable monetary contributions include those made by cash, check, electronic fund transfers, credit card charges, and payroll deductions. Documents that suffice as proof of a donation of money include canceled checks, bank statements, and credit card statements.

In addition, for monetary contributions of $250 or more, the taxpayer must obtain a written acknowledgement from the charity.

Qualified Charities

Only certain entities are eligible for a taxpayer to deduct any contribution from their income tax. The IRS maintains on their web site the Exempt Organizations Select Check, which is a list of entities that qualify for charitable giving. In addition, any churches or government entities are considered qualified charities even if they do not appear on the IRS’ web site of exempt organizations.

Itemized Deductions

Only taxpayers who itemize their deductions can deduct a charitable contribution from their income tax. A deduction for charitable contributions is not permitted for taxpayers who use the standard deduction.

Taxpayers should always review their standard deduction and all their possible itemized deduction as calculated using Form 1040 Schedule A to determine whether the standard or itemized deduction provide them the most favorable tax position.

How can I get more help with charitable giving as it relates to my income tax return?

You can speak with a tax attorney to get help with charitable contributions for your individual situation. A tax attorney will be able to help make sure any contributions you give qualify as a deduction on your income tax return.

You can speak with a tax attorney by call the phone number at the top of this web site or by completing the form below. The first consultation with a tax attorney is free of charge, so you have every reason to get help today before time runs out.

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What are the main tax law changes I need to know about for 2015?

With just over a month remaining before the end of the year, 2014 will soon be behind us. Come the start of the new year on January 1, the IRS will usher in various tax changes that taxpayers need to be aware of.

Following are a few of the main tax changes you should keep in mind as we move into 2015.

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What is the saver’s credit and how can I take advantage of it?

The IRS is reminding taxpayers how certain taxpayers can save for retirement and receive a special tax credit known as the saver’s credit for the 2014 tax year and years going forward. Since this is a tax credit, the saver’s credit can be used to reduce the amount of tax owed or to increase the amount of a refund received.

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What are the IRS Pension Plan and 401k Contribution Changes for 2015?

The IRS has announced a series of cost of living adjustments for 2015 related to pension plan and 401k contribution limits for federal income tax purposes. This article provides a summary of what changes were made and why the IRS made these changes.

Why did the IRS make these cost of living adjustments for pension plans and 401k contributions?

Section 415 of the Internal Revenue Code requires that the Secretary of Treasury review the pension plan and 401k contribution limits allowed for federal income tax purposes. Section 415 defines the existing thresholds allowed for these contributions and the points at which adjustments will be triggered. In addition, Section 415 requires that this review occur annually to address any cost of living increases.

Because Section 415 defines individual thresholds for each of the many types of contributions, only those contribution types that reach the criteria defined for them will be adjusted in any given year.

When do these changes go into effect?

The changes go into effect on January 1, 2015. This means that taxpayers can first take advantage of the tax savings related to making increased contributions on their tax returns due April 30, 2016.

What cost of living adjustments did the IRS make for pension plan and 401k contribution limits in 2015?

The IRS has made the following adjustments to pension plan and 401k contribution limits.

Employer Retirement Plan Contribution Limits

The elective annual contribution limit for employees who participate in an employer retirement plan has been increased from $17,500 to $18,000. This contribution increase applies to 401k, 403b, 457, and Thrift Savings Plans.

Catch-Up Contribution Limit

The catch-up contribution limit for employees who are 50 years old or older who participate in an employer retirement plan has been increased from $5,500 to $6,000. This contribution increase applies to 401k, 403b, 457, and Thrift Savings Plans.

Traditional IRA Contribution Phase Out

The thresholds have been increased for the phase out of deductions allowed for contributions to traditional IRA plans. For those filing as single or head of household, the phase out that previously occurred between $60,000 and $70,000 in adjusted gross income has been increased to between $61,000 and $71,000.

For those filing as married filing jointly, the phase out that previously occurred between $96,000 and $116,000 in adjusted gross income has been increased to between $98,000 and $118,000 for those whose spouse is covered by a workplace retirement plan when the spouse is making the contribution. For IRA contributors who are not covered by a workplace retirement plan but is married to someone who is covered, the deduction is phased out between $183,000 and $183,000 rather than between $181,000 and $191,000.

Roth IRA Contribution Phase Out

The thresholds have been increased for the phase out of deductions allowed for contributions to Roth IRA plans. For those filing as single or head of household, the phase out that previously occurred between $114,000 and $129,000 in adjusted gross income has been increased to between $116,000 and $131,000. For those filing as married filing jointly, the phase out has been increase from between $181,000 and $191,000 to between $183,000 and $193,000.

Retirement Savings Contribution Credit

The adjusted gross income limit for the retirement savings contribution credit has been increased from $60,000 to $61,000 for those filing married filing jointly, from $45,000 to $45,750 for those filing head of household, and from $30,000 to $30,500 for those filing married filing separately.

How will these pension plan and 401k contribution limits affect me?

How these changes will affect you will depend on your individual circumstances, as the affect varies on your filing status, level of income, and the types of plans made available to you by your employer. To get help, you need to speak with a tax attorney.

A tax attorney will have the education and experience to apply these tax law changes to your situation. By completing the form below or call the number located at the top of this web site, you can get the help you need to make sure you maximize your tax savings based on these changes. Since the initial consultation is free of charge, you have every reason to make the call today.

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What is the Taxpayer Advocate Service and How Can They Help Me?

The Taxpayer Advocate Service, or TAS, is an independent organization within the IRS. The goal of the Taxpayer Advocate Service is to help make sure that when taxpayers raise issues to the IRS, the IRS hears those issues clearly and addresses them fully.

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How will ObamaCare affect my 2014 tax return?

The Affordable Health Care Act, otherwise known as ObamaCare, is designed to make sure every patient has an opportunity to buy insurance that is affordable based on his or her level of income. Beginning with the 2014 tax year—that is, tax returns that taxpayers must file by April 15, 2015—ObamaCare will begin to affect the income tax owed on each taxpayer’s federal income tax return.

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What expenses can I deduct for a home office or business use of my home?

If you work, whether you are an employee or self-employed, you may be able to deduct certain home expenses from your federal income tax. Read on to learn more about determining if you qualify to take advantage of a home office deduction.

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How can I tell if a call from the “IRS” is legitimate or a scam?

The IRS released an alert last week about the continuing rash of telephone calls from scam artists pretending to be the IRS. The alert provided guidance on how to recognize when contact from the IRS is legitimate or is from a scam artist seeking to steal money from you.

The calls from scam artists are taking one of two forms typically. The first form is an outright demand for money. The caller will claim that you have unpaid taxes or other fees you must pay to the IRS. The caller may threaten you will additional fines or legal action in the event you do not contact them quickly and meet their demands.

The second form promises a refund. In order to obtain the refund, you must provide personal information such as your Social Security Number in order to validate your identity and your bank account information so the IRS knows where to deposit the refund. However, the scam artists will in fact use this information to take money out of your bank account and possibly commit identify theft.

In either case, the scam artists will have a well-rehearsed story. They will know enough information about you to make their demands or requests sound convincing. If they have to leave you a message, they will state that returning their call is a time sensitive matter. In addition, the caller ID information for the number from which the scam artists are calling will indicate the call is coming from the IRS.

The IRS alert made a point of emphasizing that you can easily tell the difference between a call from a scam artist and legitimate contact from the IRS if you know what to look for. The IRS outlined the signs of a scam artist in a five-point summary.

Make Contact via Telephone Call First

When the IRS needs to contact a taxpayer, the IRS always initiates the contact using an official written notice. If the first contact you receive from the IRS is via a telephone call, the call is from a scam artist.

Issue Demand for Payment without Offering Opportunity for an Appeal

When the IRS determines that a taxpayer owes money to the IRS, whether that money relates to unpaid tax liability, fines, or interest, the taxpayer will always have the opportunity to appeal the case and present evidence to support the appeal. Scam artists who demand payment will do so without offering the opportunity for you to appeal the rest. If you mention an appeal, the scam artist will likely increase the threats against you.

Specify the Type of Payment Method You Must Use

When an individual legitimately owes money to the IRS, the IRS will accept payment via a debit or credit card. In addition, the IRS may allow you to establish an installment agreement to pay the money owed over time.

In the case of a scam artist, the person will want the money immediately, often requiring that you provide payment via a prepaid debit card.

Require that You Provide Payment Information over the Phone

The IRS has established partners through which it accepts payment via credit and debit card. Although you must provide your credit or debit card information to the payment partners in order to remit payment to the IRS, these processes do not require that you provide your card information verbally.

Threaten to Arrest You

If you indicate that you are unwilling or unable to pay the money the scam artist indicates you owe, the scam artist may threaten to have the police sent to your home to have you arrested.

Although the IRS may involve law enforcement officers, the involvement of law enforcement by the IRS is in only extreme cases where an individual has shown a blatant disregard for working with the IRS over time.

 

If you receive a call from someone claiming to represent the IRS who is asking for money, you should not contact them using any number they may leave. Rather, call the IRS at 1-800-829-1040. A representative from the IRS can tell you if there is a legitimate issue with your taxes.

You can report contact from scam artists claiming to be from the IRS by visiting the FTC Complaint Assistant at FTC.gov.

Whom should I speak with if I need help addressing a legitimate issue with the IRS?

If you owe money to the IRS or have other questions about preparing your tax return, you can get help by contacting a tax attorney. A tax attorney can answer questions about completing your tax return or resolving a dispute with the IRS about money you may owe.

You can contact a tax attorney by calling the number at the top of this web site or by completing the form below. Your initial conversation with a tax attorney is free, so you have every reason to get help today.

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Whom can I claim as a dependent on my tax return?

In the search for opportunities to reduce the amount we have to pay each year for income tax, a popular question is whom a taxpayer can claim as a dependent. This is a great question to re-evaluate each year, because having dependents is one of the easiest ways for taxpayers to reduce their taxable income.

For the 2014 tax year, each dependent exemption will reduce a taxpayer’s taxable income by $3,950. Therefore, every taxpayer needs to identify and claim every dependent exemption he or she can.

If you want to know whom you can claim as a dependent, read on to learn how the IRS identifies dependent exemptions.

Three Tests for Identifying a Dependent

The IRS allows a taxpayer one exemption for each individual the taxpayer can claim as a dependent. A dependent is a qualifying child or a qualifying relative of the taxpayer.

A child must meet five tests to be considered a qualifying child:

-          Relationship – child is a son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendent of any of them

  • Age – child under the age of 19 at the end of the year or under the age of 24 at the end of the year if a full-time student
  • Residency – child lived with the taxpayer for more than half the year
  • Support – child provided less than half his or her support for the year
  • Joint return – child did not provide a joint return for the year

A person must meet four tests to be considered a qualifying relative:

  • Not a qualifying child – person is not a qualifying relative if person is the taxpayer’s qualifying child or the qualifying child of someone else
  • Member of household – person lives with taxpayer all year
  • Gross income – person’s gross income less than $3,900
  • Support – taxpayer provides more than half the person’s support during the calendar year

If the individual is a qualifying child or qualifying relative, the IRS requires the qualifying child or qualifying relative to pass three tests in order for a taxpayer to claim the individual as a dependent.

Dependent Taxpayer Test

If the taxpayer can be claimed as a dependent on someone else’s tax return, the taxpayer cannot claim anyone as a dependent. This applies even if the taxpayer has a qualifying child or a qualifying relative who the taxpayer could otherwise claim as a dependent.

Likewise, if the taxpayer is filing a joint tax return and the taxpayer’s spouse can be claimed on someone else’s tax return as a dependent, the taxpayer cannot claim anyone as a dependent.

Joint Return Test

A taxpayer typically cannot claim a married person as a dependent if that married person files a joint tax return. The one exception to this test is if the married person files a joint return only for the purchase of obtaining a refund of income tax withheld or estimated tax paid.

Citizen or Resident Test

A taxpayer cannot claim an individual as a dependent unless the individual is a citizen, resident alien, or national of the United States, or the individual is a citizen of Canada or Mexico. In addition, this test is met if a citizen or national of the United States adopts a child who is not a citizen, resident alien, or national of the United States and that child lives with the taxpayer for the entire year.

Who should I speak with if I have questions about who I can claim as a dependent?

If you have questions about who qualifies as a dependent for income tax purposes, you should speak with a tax attorney. Only a tax attorney can answer your question about dependents, help you prepare your income tax return, and provide you confidentiality about your tax matters as protected by attorney-client privilege.

You can speak with a tax attorney by calling the phone number located at the top of this web site or by completing the following form. The first conversation with the attorney is free, so you have every reason to get help today.

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What are Points and How Can They Reduce my Federal Income Tax?

Interest rates for obtaining a home mortgage are still close to historically low levels. You have probably heard radio or television advertisements advising people to refinance their home mortgage if their existing interest rate is above a certain amount.

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