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Volume
8, Issue 3 - May 2006 |
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"I
love your newsletter! It's refreshing, fun
and filled with helpful hints"
Toni Paglia,
Director of Development, The ARC
Syracuse, New York |
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IRS RULES & REGS REMINDERS |
Of
course, it’s too late now to change anything on last year’s taxes...but it
is a good time to remind ourselves about the basic IRS Rules & Regulations.
For complete rulings, visit www.irs.gov.
Q: What portion of a charitable contribution is tax deductible?
A: Only that portion of a contribution which exceeds the fair market
value of a benefit received by the donor is considered a gift. A charitable
gift can only be considered a gift when there is no anticipation or
commitment to receive something of substantial value in return. So, the cost
of a ticket to a dinner or a concert is not fully tax deductible.
Q: How is fair market value determined?
A: Fair market value is the amount the item or benefit would be worth if
sold to the general public. So, the donor can deduct the any amount above
the fair market value of the dinner or concert.
Q:
Can a donor deduct the cost of a raffle or auction ticket?
A: Payments which provide the donor with an opportunity to acquire something
of value are not gifts. No part of any payment for a raffle, lottery, bingo
game admission or admission ticket that make a donor eligible for a door
prize is deductible whether the donor “wins” or not. If the ticket exceeds
the fair market value of the item, the excess may be deductible. So, on a
raffle, you hope to win big and pay little - not deductible as a donation. DO
NOT print “donation” on your raffle ticket!
Q:
What if the raffle prize was donated? Is the cost of the raffle ticket a
donation in this case?
A:
No. The same rules apply whether the nonprofit bought the prize at full
value, at wholesale value or received it as a donation. Only the amount paid
that exceeds the fair market value of the ticket can be deducted.
Q:
Does the size of the contribution relative to the value of the benefit
affect the amount deductible as a charitable contribution?
A: No. No matter what the size of the contribution, it is only deductible to
the extent that it exceeds the fair market value of the benefit received.
Q: What rules apply to a used car donated to a qualified charity? Are there
special forms to attach? What records are needed?
A: If a donor claims a deduction on of over $500 for all
contributed property, he must attach a
Form 8283
Noncash Charitable Contributions, to
the return. If he claims a total deduction of $5,000 or less for all
contributed property, he must only complete Section A of
Form 8283 .
If he claims a deduction of more than $5,000 for an item or a group of
similar items, he generally needs to complete Section B of
Form 8283 which
requires, in most cases, an appraisal by a qualified appraiser. The donor
will need to obtain and keep evidence of the car donation and be able to
substantiate the fair market value of the car.
If he is claiming a deduction
of $250 or more for the car donation, the donor will also need a
contemporaneous written acknowledgement from the charity that includes a
description of the car and a statement of whether the charity provided any
goods or services in return for the car and, if so, a description and
estimate of the fair market value of the goods or services.
Source: www.irs.gov/faqs/faq-kw29.html
Q: Can your volunteers deduct the value of their time spent volunteering?
A: Volunteers may not deduct the value of their time for volunteering and
may not deduct personal, living or family expenses involved in volunteering
unless it is necessary for them to be away from home overnight.
Go to www.irs.gov for more on charitable giving regulations.
Back to Table of
Contents
A nonprofit has certain substantiation requirements to
assist its donors in claiming a charitable contribution.
For contributions of less than $75,
a nonprofit generally must give donors a written statement if it receives a
payment that is more than $75 and is partly a contribution and partly for goods
or services.
To claim this donation, the donor must have a receipt, letter,
or other written communication showing the name of the organization, the date of
the contribution and the amount of the contribution.
For contributions of more than $250,
a nonprofit must supply a written acknowledgement of the contribution.
If a donor made more than one contribution of $250 or more, the
nonprofit must provide either a separate acknowledgement for each or one
acknowledgement that shows the total contributions within the year.
The acknowledgment must be in writing
and include:
- The amount of cash contributed.
- Whether the nonprofit gave any goods or services as a result of the
contribution (other than certain token items and membership benefits).
- A description and good faith estimate of the value of any goods or
services received.
- The acknowledgment must be received on or before the earlier of: the
date the donor files his return or for the year in which the contribution
was made, or the date, including extensions, for filing the return.
For the record, the IRS defines “cash contributions” as
“...those paid by cash, check, credit card or payroll deduction. They also
include out-of-pocket expenses when donating services.”
Source: IRS Publication 526. Read the entire publication at
www.irs.gov.
Note: It is the donor’s
responsibility to get this acknowledgment from the nonprofit...but a nonprofit
should be proactive about this requirement as good business and good donor
relations!
Back to Table of
Contents
It’s time to blow the dust off the boxes in the storage
room, sort through them and decide what to keep and what to toss - after
shredding, of course!
Many tax advisors recommend you keep copies of your tax returns and 990s
forever - why? So that you can prove to the IRS that you actually filed. In most
cases the IRS can audit your return for 3 years. Here is what one CPA
recommends:
Keep one year: bank reconciliations, duplicate deposit slips.
Keep 3 years: general correspondence, employment applications, expired insurance
policies, petty cash vouchers, W-4 forms.
Keep 7 years: OSHA logs, accident reports and settled claims, accounts payable
and receivable ledgers, canceled checks, expired contracts and leases,
electronic fund transfer documents, personnel records (after termination),
inventories of products and materials, invoices to customers’ vendors, leases,
payroll records, purchase orders, sales records, journals, workers’ comp
documents, scrap and salvage records, subsidiary ledgers, time books/cards.
Keep permanently: audit reports of accountants, cash books, cancelled checks for
important payments, construction documents, important correspondence,
deeds/mortgages/bills of sale/titles, depreciation schedules, end-of-year
financial statements, end-of-year general and private ledgers, licenses, loan
document and notes, minutes of Board of Directors, bylaws and charter, property
appraisals by outside appraisers, property records such as blue prints and
plans, tax returns and worksheets, trademark registrations.
Back to Table of
Contents
There
is a wealth of information on Internal Revenue Service web site at
www.irs.gov. For the most
part, the web site is written in plain English and is easy to navigate. Search
for information about charitable contributions and scan the FAQ sections.
Some helpful IRS Publications you will want to read are:
- Publication 561: Determining the value of Donated Property,
- Publication 526: Charitable Contributions,
- Publication 8283: Noncash Charitable Contributions, and
- Tax Topic 506: Contributions.
Two of the most definitive sources for nonprofit information continue to be
Board Source at
www.BoardSource.org and The Independent Sector at
www.independentsector.org. These sites will give you information about
legislative issues affecting nonprofits, salary surveys, job descriptions for
Board and staff, articles of interest and much, much more. I’d recommend that
you book mark these two sites and visit them often to keep up to date.
Please let me know if you find good nonprofit Internet resources so I can
share them with other readers...there are now more than 3,450 people who receive
this newsletter!
Back to Table of
Contents
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HOW CAN I HELP YOU?
TAKE THIS QUICKIE QUIZ
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Please give me a call if you want to turn any NO into a YES. I can help
with:
- turning your Board into a dynamic group of volunteers,
- facilitating a strategic planning session,
- analyzing your current fundraising and suggesting some new ideas, and
- training volunteers and staff in becoming more effective fundraisers.
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Here is what people have said about my training and facilitation:
“You certainly shifted my paradigm. After hearing you last
Friday, it is the first time in 11 years as an ED that I was excited abut
fund development. And you got my Board members to that point as well. “
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Hopper
RDC for Children, Richardson, TX
“Your seminar in Dallas was the best I ever attended. You
are wise and hilarious.”;
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Catholic Charities of Dallas
"Jean conducted an extremely well
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support."
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Casa Esperanza
“Your training was invaluable to me. I dreaded doing this
because I couldn’t even sell someone a candy bar in the past but I was
inspired by your advice to try. I raised about $377,000!
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Keystone Botanical Garden, El Paso,
TXX
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were amazing! What an OPPORTUNITY for me!
Your presentation style was EXCELLENT. By far the best
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Epilepsy
Foundation of Minnesota
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Visiting Nurse Association,
Dallas, TX
Jean Block
Consulting, Inc.
7915 Cliff Road NW
Albuquerque NM 87120
(505) 899-1520
Fax (505) 890-5285
Email:
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"I
love your newsletter! It's refreshing, fun
and filled with helpful hints"
Toni Paglia,
Director of Development, The ARCRC
Syracuse, New Yorkk |
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