Mission of Deeds Walk

We had a great time sponsoring the Annual Mission of Deeds Walk held at Lake Quannapowitt in Wakefield, MA.

Please consider helping their mission of supporting homeless and needy families with a donation of household goods, furniture, or a cash donation.? You can learn more at www.missionofdeeds.org.

Mission of Deeds Walk 2013

‘TIS THE SEASON TO DO SOME CLEANIN’

For our May newsletter, I wrote an article called Spring Clean Up.? I pitched the idea to the crew at QuantiaMD about turning the various sections from that article into a series of four podcasts.? They agreed, and then added video and poll questions to my silky tones, which help explain the four topics addressed in that newsletter even better.?

Each of the following podcast is?only a few minutes long, and if I do say so myself, is totally worth checking out:

If you have suggestions of tax or?basic financial planning topics? you’d like me to write about and/or record for QuantiaMD, please e-mail me those? suggestions.

Spring Clean Up Project #4: Your Closets, Garages, and Attics

In today’s consumer driven world we live in, almost everyone builds up clutter that never sees the light of day. Why not take this opportunity to clean out your closets, garages, and attics and generate a tax deduction while you’re at it?

Donating these goods can also save you taxes, as long as you itemize your deductions instead of claiming the standard deduction. Just make sure to make a list of what you donated, and somehow come up with the fair value of each donated item.

According to the instructions to the Form 8283 – Non-cash Charitable Contributions:

The FMV of used household items and clothing is usually much lower than when new. A good measure of value might be the price that buyers of these used items actually pay in consignment or thrift shops. You can also review classified ads in the newspaper or on the Internet to see what similar products sell for.

You cannot claim a deduction for clothing or household items you donate after August 17, 2006, unless the clothing or household items are in good used condition or better. However, you can claim a deduction for a contribution of an item of clothing or household item that is not in good used condition or better if you deduct more than $500 for it and include a qualified appraisal of it with your return.

Publication 526 – Charitable Contributions sheds more light onto this issue:

The fair market value of used household items, such as furniture, appliances, and linens, is usually much lower than the price paid when new. These items may have little or no market value because they are in a worn condition, out of style, or no longer useful. For these reasons, formulas (such as using a percentage of the cost to buy a new replacement item) are not acceptable in determining value.

You should support your valuation with photographs, canceled checks, receipts from your purchase of the items, or other evidence. Magazine or newspaper articles and photographs that describe the items and statements by the recipients of the items are also useful. Do not include any of this evidence with your tax return.

Properly valuing your donated clothing and household rules has become more important in the post August 17, 2006 “Good or Better” world. If you ever get audited, there is a good chance that the IRS will use these new rules as a way to greatly reduce the deduction they will allow you to claim unless you can:

? Substantiate that the donated goods were in good condition or better, and

? Demonstrate how you came up with the Fair Market Value you claimed

To help you put a value on the donated goods, we have created a few different tools based on the published values of used merchandise sold at the thrift shops of the Salvation Army and Goodwill Industries. For starter, check out UDoGood, an iPhone App. Or, download our Non-cash Charitable Donation worksheet in either pdf format or as an Interactive Microsoft Excel Spreadsheet. (To download the Excel Spreadsheet, right click your mouse and hit “Save Target As”, and then choose the directory on your computer where you want this file to sit.)

Simply complete either version of this worksheet, take a few photos of what you are donating, and file along with your tax records, and use this information when completing your Form 8283 next year to attach to your federal income tax return.? Hopefully this information will do the trick if you ever get audited.? While we don’t recommend that you exaggerate the value you claim for the items you’re donating, we do believe you should take the full deduction based on the fair market value of the stuff you gave away.

Spring Clean Up Project #3: Your Credit Report

Currently, three companies, Equifax, Experian, and TransUnion, track everyone’s credit histories. Don’t forget that banks, lenders, retailers, landlords, and other “credit grantors” use credit reports generated by these companies to determine your creditworthiness. Why not take this opportunity to clean up incorrect or misleading information reflected on your credit reports?

Your credit report reflects quite a bit of information about you and your financial affairs.

  • The bulk of your credit report focuses on your various loans and credit card accounts. Included is the name of each?of your creditors, as well as the type of account, the minimum monthly payment, the account’s limit or high balance, and the current outstanding balance.
  • Your credit report also reflects the most recent twenty-four month payment history for each creditor, showing whether each month’s payments were current, delinquent, or in default.
  • Another section on your credit report details inquiries that were made by potential creditors. In this section, the name of the creditor and the date of inquiry are listed for each request that has been made.
  • Your credit report also includes “public?records” such as tax liens, bankruptcies, and judgments made against you. Most public records remain part of your credit history for seven to ten years. If you have any tax liens, they won’t be removed from your credit report until they are paid off.

The best way to find out how your credit report looks is to order one from time to time. You’re allowed to order three free credit reports per year – one from each credit bureau – through annualcreditreport.com. If you find errors on your credit report, or accounts listed as open that had previously been closed, reach out to each credit reporting agency to have those items cleaned up as soon as possible.

Spring Clean Up Project #2: Your Tax Files and Records

With the April 15th deadline still a recent memory, most of us probably still have our tax records piled up somewhere in our homes. Why not take this opportunity to shred all the documents that you no longer need to keep? According to the IRS:

Well organized records make it easier to prepare a tax return and help provide answers if your return is selected for examination, or to prepare a response if you receive an IRS notice.

  • What to Keep – Individuals. In most cases, keep records that support items on ???? your tax return for at least three years after that tax return has been? filed. Returns filed before the due date are treated as filed on the due date. Examples include bills, credit card and other receipts, invoices,??mileage logs, canceled, imaged or substitute checks or other proof of payment and any other records to support deductions or credits claimed.??You should typically keep records relating to property at least three? years after you’ve sold or otherwise disposed of the property. Examples include a home purchase or improvement, stocks and other investments,? Individual Retirement Account transactions and rental property records.
  • What to Keep – Small Business Owners. Typically, keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is ???? later. Also, keep records documenting gross receipts, proof of purchases, expenses, and assets. Examples include cash register tapes, bank deposit?slips, receipt books, purchase and sales invoices, credit card charges and sales slips. Forms 1099-Misc, canceled checks, accounts statements, petty cash slips and real estate closing statements. Electronic records can?included databases, saved files, e-mails, instant messages, faxes and?voice messages.

There is no period of limitations to assess tax when a return is fraudulent or when no return is filed. If income that you should have reported is not reported, and it is more than 25% of the gross income shown on the return, the time to assess is 6 years from when the return is filed. For filing a claim for credit or refund, the period to make the claim generally is 3 years from the date the original return was filed, or 2 years from the date the tax was paid, whichever is later. For filing a claim for a loss from worthless securities the time to make the claim is 7 years from when the return was due.

For more information from the IRS, check out:

  • Publication 552, Recordkeeping for Individuals, provides more information on recordkeeping requirements for individuals.
  • Publication 583, Starting a Business and Keeping Records
  • Publication 463, Travel, Entertainment, Gift,?and Car Expenses, provide additional information on required documentation for taxpayers with business expenses

For a more complete listing, please check out this Record Retention Guide Compiled by the Massachusetts Society of CPAs available on my firm’s website.