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Six Tips For Gifts To Charity

If you're thinking about making a charitable donation this year and want to claim a tax deduction for your gifts, you must itemize your deductions. This is just one of several tax rules that you should know about before you give. Here's what else you need to know:

1. Qualified charities. You can only deduct gifts you give to qualified charities. Give us a call if you're not sure if the group you give to is a qualified organization.

2. Monetary donations. Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.

3. Household goods. Household items include furniture, furnishings, electronics, appliances and linens. If you donate clothing and household items to charity they generally must be in at least good used condition to claim a tax deduction. If you claim a deduction of over $500 for an item it doesn't have to meet this standard if you include a qualified appraisal of the item with your tax return.

4. Records required. You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.

5. Year-end gifts. You can deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2014. This is true even if you don't pay the credit card bill until 2015. Also, a check will count for 2014 as long as you mail it in 2014.

6. Special rules. Special rules apply if you give a car, boat or airplane to charity. For more information about this and other questions about charitable giving, please contact our office.

Remington O'Dell
Eight Tips for Taxpayers Who Owe Taxes

IRS Summertime Tax Tip 2013-14, August 2, 2013

While most taxpayers get a refund from the IRS when they file their taxes, some do not. The IRS offers several payment options for those who owe taxes.

Here are eight tips for those who owe federal taxes.

  1. Tax bill payments.  If you get a bill from the IRS this summer, you should pay it as soon as possible to save money. You can pay by check, money order, cashier’s check or cash. If you cannot pay it all, consider getting a loan to pay the bill in full. The interest rate for a loan may be less than the interest and penalties the IRS must charge by law.
  2. Electronic Funds Transfer.  It’s easy to pay your tax bill by electronic funds transfer. Just visit IRS.gov and use the Electronic Federal Tax Payment System. You may also use EFTPS to pay your taxes by phone at 800-555-4477.
  3. Credit or debit card payments.  You can also pay your tax bill with a credit or debit card. Even though the card company may charge an extra fee for a tax payment, the costs of using a credit or debit card may be less than the cost of an IRS payment plan. To pay by credit or debit card, contact one of the processing companies listed at IRS.gov.
  4. More time to pay.  You may qualify for a short-term agreement to pay your taxes. This may apply if you can fully pay your taxes in 120 days or less. You can request it through the Online Payment Agreement application at IRS.gov. You may also call the IRS at the number listed on the last notice you received. If you can’t find the notice, call 800-829-1040 for help. There is generally no set-up fee for a short-term agreement.
  5. Installment Agreement.  If you can’t pay in full at one time and can’t get a loan, you may want to apply for a monthly payment plan. If you owe $50,000 or less, you can apply using the IRSOnline Payment Agreement application. It’s quick and easy. If approved, IRS will notify you immediately. You can arrange to make your payments by direct debit. This type of payment plan helps avoid missed payments and may help avoid a tax lien that would damage your credit.

    Taxpayers may also apply using IRS Form 9465, Installment Agreement Request. If you owe more than $50,000, you must also complete Form 433F, Collection Information Statement. For approved payment plans the one-time user fee is $105 for standard and payroll deduction agreements. The direct debit agreement fee is $52. The fee is $43 if your income is below a certain level.

  6. Offer in Compromise.  The IRS Offer-in-Compromise program allows you to settle your tax debt for less than the full amount you owe. An OIC may be an option if you can't fully pay your taxes through an installment agreement or other payment alternative. The IRS may accept an OIC if the amount offered represents the most IRS can expect to collect within a reasonable time. Use theOIC Pre-Qualifier tool to see if you may be eligible before you apply. The tool will also direct you to other options if an OIC is not right for you.
  7. Fresh Start.  If you’re struggling to pay your taxes, the IRS Fresh Start initiative may help you. Fresh Start makes it easier for individual and small business taxpayers to pay back taxes and avoid tax liens.
  8. Check withholding. You may be able to avoid owing taxes in future years by increasing the taxes your employer withholds from your pay. To do this, file a revised Form W-4, Employee’s Withholding Allowance Certificate, with your employer. The IRS Withholding Calculator tool at IRS.gov can help you fill out a new W-4.

For more information about payment options or IRS's Fresh Start program, visit IRS.gov. Also, see Publications 594, The IRS Collection Process, and 966, Electronic Choices to Pay All Your Federal Taxes, for more information. Get publications and forms at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

 

Remington O'Dell
Ten Tax Tips for Individuals Selling Their Home

IRS Summertime Tax Tip 2013-24, August 26, 2013

If you’re selling your main home this summer or sometime this year, the IRS has some helpful tips for you. Even if you make a profit from the sale of your home, you may not have to report it as income.

Here are 10 tips from the IRS to keep in mind when selling your home.

  1. If you sell your home at a gain, you may be able to exclude part or all of the profit from your income. This rule generally applies if you’ve owned and used the property as your main home for at least two out of the five years before the date of sale.
  2. You normally can exclude up to $250,000 of the gain from your income ($500,000 on a joint return). This excluded gain is also not subject to the new Net Investment Income Tax, which is effective in 2013.
  3. If you can exclude all of the gain, you probably don’t need to report the sale of your home on your tax return.
  4. If you can’t exclude all of the gain, or you choose not to exclude it, you’ll need to report the sale of your home on your tax return. You’ll also have to report the sale if you received a Form 1099-S, Proceeds From Real Estate Transactions.
  5. Use IRS e-file to prepare and file your 2013 tax return next year. E-file software will do most of the work for you. If you prepare a paper return, use the worksheets in Publication 523, Selling Your Home, to figure the gain (or loss) on the sale. The booklet also will help you determine how much of the gain you can exclude.
  6. Generally, you can exclude a gain from the sale of only one main home per two-year period.
  7. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is usually the one you live in most of the time.
  8. Special rules may apply when you sell a home for which you received the first-time homebuyer credit. See Publication 523 for details.
  9. You cannot deduct a loss from the sale of your main home.
  10. When you sell your home and move, be sure to update your address with the IRS and the U.S. Postal Service. File Form 8822, Change of Address, to notify the IRS.

For more information on this topic, see Publication 523. It’s available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Remington O'Dell
Business Vehicle Expense Deduction

Expenses related to use of a car, van, or truck for business can be deducted on your tax return. In order to claim a deduction for business use of a car or truck, a taxpayer must have ordinary and necessary costs related to one or more of the following:

  • Traveling from one work location to another within the taxpayer’s tax home area. (Generally, the tax home is the entire city or general area where the taxpayer’s main place of business is located, regardless of where he or she resides.)
  • Visiting customers.
  • Attending a business meeting away from the regular workplace.
  • Getting from home to a temporary workplace when the taxpayer has one or more regular places of work. (These temporary workplaces can be either within or outside taxpayer’s tax home area.)

Expenses related to travel away from home overnight are travel expenses. These expenses are discussed in Chapter One of Publication 463, “Travel, Entertainment, Gift, and Car Expenses.” However, if a taxpayer uses a car while traveling away from home overnight on business, the rules for claiming car or truck expenses are the same as stated above.

It is important to note that costs related to travel between a taxpayer’s home and regular place of work are commuting expenses and are not deductible.

Taxpayers can choose to use either the standard mileage rate or actual expenses to compute their allowable business deduction. They may want to figure the deduction using both methods to see which provides a larger deduction.

Standard Mileage Rate Method

The standard mileage rate may be used to figure the deductible costs of a vehicle that is owned or leased. If a taxpayer wishes to use the standard mileage rate for a leased vehicle, it must be used for the entire lease period. In other words, a taxpayer must use the standard mileage rate for the first year a vehicle is available for business use in order to use the standard mileage rate in subsequent years.

The standard mileage rate is adjusted annually by the IRS to reflect changes in the cost of operating a vehicle. In some situations it is adjusted during the year. The 2006 standard mileage rate of 44.5 cents per mile, as well as rates for previous periods, can be found at http://www.irs.gov/taxpros/article/0,,id=156624,00.html.

The standard mileage rate is used in place of actual expenses. Taxpayers who choose the standard mileage rate may not deduct actual expenses, such as depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance or vehicle registration fees. Business-related parking fees and tolls may be deducted in addition to the standard mileage rate. Fees for parking at a taxpayer’s main place of business or tolls related to commuting to and from that main place of business are personal expenses which are not deductible.

The standard mileage rate cannot be used if the taxpayer:

  • Uses the car for hire (such as a taxi).
  • Uses five or more cars at the same time (as in fleet operations).
  • Claims depreciation or a section 179 deduction (Publication 463, Chapter 4).
  • Is a rural mail carrier who receives a qualified reimbursement (Publication 463, Chapter 4).

Actual Expenses Method

Actual car or truck expenses include:

  • Depreciation
  • Lease payments
  • Registration fees
  • Licenses
  • Gas
  • Insurance
  • Repairs
  • Oil
  • Garage rent
  • Tires
  • Tolls
  • Parking fees

These and other expenses are discussed in detail beginning on page 16 of Publication 463. If business use of the vehicle is less than 100 percent, expenses must be allocated between business and personal use. Only the business use percentage of each expense is deductible.
For example, if, based on records maintained by a taxpayer, total actual vehicle expenses for a given year are $2,500 and the vehicle is used 75 percent for business, the allowable deduction using the actual expense method is $1,875 ($2,500 x 75 percent).

Recordkeeping

It is important to keep complete records to substantiate items reported on a tax return. In the case of car and truck expenses, the types of records required depend on whether the taxpayer claims the standard mileage rate or actual expenses.

To claim the standard mileage rate, appropriate records would include documentation identifying the vehicle and proving ownership or a lease and a daily log showing miles traveled, destination and business purpose.

For actual expenses, a mileage log helps establish business use percentage. Taxpayers should also retain receipts, invoices and other documentation to show cost and establish the identity of the vehicle for which the expense was incurred. For depreciation purposes they need to show the original cost of the vehicle and any improvements as well as the date it was placed in service.

Remington O'Dell
Reconciling Accounts In QuickBooks

Reconciling your bank accounts in QuickBooks is one of the most important tasks you can do in order to prevent data entry errors. As you write checks, withdraw money, make deposits, and incur bank charges, each of these transactions are recorded in QuickBooks and then should be matched against the transactions on your monthly bank statement. This matching process is called reconciling. Reconciling your accounts is a key step to ensuring the accuracy of your accounting records.

BEGINNING YOUR RECONCILIATION

To begin the reconciliation choose Banking from the toolbar and then select Reconcile from the drop down menu in order to open the Begin Reconciliation window.

From the Begin Reconciliation window select the account you want to reconcile In the Account field. In the Statement Date field, enter the date from the bank statement you are trying to reconcile. Compare the amount shown in the Beginning Balance field to the opening balance amount shown on your statement. We will address how to correct differences in the Beginning Balance field in a later post. If the beginning balance is correct, then find the ending balance on your statement and enter it in the Ending Balance field. Click Continue to open the Reconcile window for the account you've chosen.

COMPLETE YOUR RECONCILIATION

When you find a transaction in the Reconcile window that matches a transaction on the statement, click the transaction to mark it as cleared. When a transaction is marked as cleared it will become grayed out and a check mark will be placed next to the transaction. For each transaction you select, verify that the amount in the Reconcile window matches the amount shown on your statement.

If some amounts don't match or if you find transactions that contain other errors, correct the transactions. If you find a transaction on your statement that is not shown in the QuickBooks list of uncleared transactions, enter the transaction now.

When you've finished selecting the transactions, look at the difference amount in the bottom right corner of the Reconcile window, if the amount is 0.00. then click Reconcile Now. You've reconciled the account with the statement. At this point, you can have QuickBooks print a reconciliation report.

If the amount is not zero. Your account does not balance for the period of time covered by the statement, and you need to correct the difference by locating the missing transaction or correcting an improperly entered amount. 

It is important to note that bank accounts are not the only accounts that can be reconciled. You can also reconcile your credit card accounts to guarantee their accuracy.  

Remington O'Dell