We can find out just about anything on line these days. Now the IRS has added to the available information by launching a new online search tool called Exempt Organizations Select Check. This tool allows you to check the federal tax status of a nonprofit organization.
You can check whether an organization is eligible to receive tax-deductible contributions, and whether those contributions are subject to the 50% or 30% limitation. You can also check to see if their charitable status has been revoked, or if they have filed the e-postcard form for their annual 990.
So if you are asked to give to an organization that you’re not quite sure of, take the time to check them out first. When tax filing time comes around next year, you may be glad you did.
So if you missed my post last week… thanks for following me! I was way, way under the weather and not really thinking about blogging. Now that I actually believe I will live, let’s talk about our new client portal.
You may have noticed it in the upper right corner of our website. The portal allows us to safely upload and download files with our clients through a secure internet platform. This is much safer than emailing copies of sensitive information.
If you would like to use the portal to send us information, just drop us an email or give us a call. We will set up your portal and provide you with a unique password to access it. Once there, you can change the password to anything you like. Then you can upload documents from your computer to the portal, and we will pick them up on our end. Saves you time, and keeps your information secure!
Remember when the top tax bracket was 50%? At the risk of dating myself, I will admit that I do. That top bracket is now 35%, and only kicks in after your taxable income exceeds $388,000 (married) or $178,000 (single). It has been at this level for the past several years, but it’s getting ready to change again, if Congress lets the current legislation “sunset”.
We’ve heard a lot about “sunset” legislation. It refers to tax law that was adopted with an expiration date. A lot of the current tax legislation that applies to individual taxes is schedule to expire, or sunset, after 2012. The biggest impact will be felt in the area of capital gains. For 2012, the maximum tax on capital gains is 15%; its zero if you are in a 15% or lower tax bracket. After 2012, the 15% increases to 20% and the zero rates go away completely.
With the state of our economy, I’m not betting on Congress to keep these favorable rates in place. However, it is an election year, so anything can happen. But you might want to keep the sunset in mind as you plan for the rest of the year.
After the devastation of Hurricane Irene, we are fielding a lot of questions about the deductibility of casualty losses. Unfortunately, the news isn’t good. Even though FEMA was telling everyone that their losses were deductible, the IRS places such stringent restrictions on deductible losses that very few taxpayers actually receive a benefit.
The first part of the equation is the amount of the loss. It’s not necessarily what you had to spend to bring your property back to a pre-storm state. The IRS deems the loss to be the lesser of the property’s cost basis, or its fair market value. For example, if you lost two heating & air units (like I did) that cost $10,000 to replace; the replacement cost is not your loss. The loss is the lower of what you paid for the units originally and what they were worth the day before the storm. So if you paid $6,000 8 years ago, and you could resell them for $3,000, then the $3,000 is the amount of the loss for tax purposes.
It gets worse. Once you have determined the amount of the loss, you subtract any insurance proceeds you received. If there is still a loss, then only the part of the loss that exceeds 10% of your adjusted gross income is actually deductible. So in our example, if you received a $1,500 insurance payment, then there is only $1,500 of deductible loss left. If you have adjusted gross income of more than $15,000, then none of the loss is deductible.
Continuing from last week, here are a few more questions we often hear.
WHAT ARE ESTIMATED TAX PAYMENTS?
Estimated tax payments are amounts you pay in each quarter in order to cover the tax you think you will owe for that year. Basically, tax law requires you to pay taxes as you earn money. If you are a salaried employee, taxes are withheld from your paycheck and remitted to the taxing authorities. However, if you are self-employed, or have other sources of investment income, no taxes are withheld during the year. So you are required to pay the tax in quarterly installments on April 15th, June 15th, September 15th and January 15th. You should estimate these amounts when you file your previous year’s return.
IS MY CAR DEDUCTIBLE?
The use of your personal vehicle in the course of a trade or business, or for medical or charitable purposes, may lead to a deduction. Generally, the deduction consists of multiplying the number o f business miles by a rate set by the IRS each year. For 2011, that rate was $0.51 for the first half of the year and $0.555 for the last half of the year. The deduction for medical miles is computed at $0.19 through June 30, 2011, and at $0.235 for the remainder of the year. For charitable use of your personal vehicle, the deduction is computed at the rate of $0.14 per mile.
SHOULD I ITEMIZE?
The answer depends on your filing status and the amount of deductible expenses you have incurred. The IRS offers a standard deduction of $5,950 for single and married separate filers, and $11,900 for married joint or head of household filers. Unless your deductions exceed these amounts, there is no benefit in itemizing. Mortgage interest is usually the largest deduction, so if you don’t have that, you probably will not itemize. Also deductible are property taxes, charitable contributions and some medical expenses (you need enough medical expenses to exceed 7.5% of your adjusted gross income before any of them are deductible).
