Tax Tips

New Rules on Charitable Contributions
haritable contributions can be tax deductible, but you must have the proper records to support your deduction. Due to the Pension Protection Act of 2006 the rules on recordkeeping for charitable contributions became a little more strict beginning in January 2007.

To deduct a charitable cash donation, regardless of the amount, you must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Acceptable bank records would include canceled checks or bank or credit union statements containing the name of the charity, the date and the amount of the contribution.


Forgotten to File an Income Tax Return?
he IRS reminds that taxpayers should file all tax returns that are due regardless of whether or not full payment can be made with the return.

Depending on an individual’s circumstances, a taxpayer filing late could qualify for a payment plan. It's never too late to file. However, all payment plans require continued compliance with all filing requirements after the plan is approved.

Taxpayers unable to pay all taxes due on the bill are encouraged to pay as much as possible. By paying as much as possible now, the amount of penalties interest and penalties owed will be lessened. They should then immediately contact the IRS to explain their situation.

Based on the circumstances, a taxpayer could qualify for an extension of time to pay. The IRS is willing to offer extensions of time to pay in order to assist in tax debt repayment. A taxpayer can request an extension from 30 - 120 days depending on the specific situation. Penalties and interest incurred will be less through an extension of time to pay rather than seeking to enter into an installment agreement. If a taxpayer cannot made payment in full upon receipt of the bill, the IRS may request a Collection Information Statement (CIS) to compare individual or business monthly income with expenses and to assist in determining a payment plan.

More ways taxpayers can use to resolve their debt include: (1) Monthly payments through an Installment Agreement; (2) Temporary delay or significant hardship consideration, or (3) Offer in Compromise.


Simple Steps for Charitable Donations
ou may be able to use your gifts to tax-exempt charitable and religious groups to reduce your taxes.
But taxpayers need to keep in mind some simple steps to make sure they get appropriate benefit for their generous donations. In particular, there are some important guidelines for donating used cars and other property, such as stocks and bonds.

The tax benefit for charitable contributions is only available for taxpayers who itemize deductions. Those who take a standard deduction receive no additional tax benefit for their contributions.

Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction for that tax year would be $200. You include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.

Those itemizing deductions reduce their taxable income by the total contributed to qualified tax-exempt organizations, with some limits. The tax saving usually equals the deduction times the marginal tax rate – the top rate for the person’s income level.

The IRS also reminds taxpayers to keep appropriate records to substantiate the value of their gifts. For example, for any single gift of $250 or more, a taxpayer must have a written acknowledgement from the charity by the earlier of the date the person files the tax return or the filing deadline, including extensions. A person donating property valued at more than $5,000 must obtain a qualified written appraisal.

Additional note: Some organizations have failed to establish or have been unable to maintain their status as public charities or as operating foundations. Although this does not indicate that the organizations have lost their status as organizations described in section 501(c)(3), eligible to receive deductible contributions, you should be careful when contributing your funds. [List by the IRS]


Did You Take Enough Tax Deductions?
any Americans are routinely failing to take deductions they're entitled to, thus overpaying their taxes by billions of dollars collectively. Many people are so confused by tax laws or so frightened by the threat of an audit that they fail to take perfectly leagal write-offs.

For example, some who run a business out of their house dont' take a home-office deduction because they fear it is a red flag for the IRS. Others simply forget to deduct job-search expenses. And one million or more American taxpayers overpay their taxes by taking "the standard deduction" instead of itemizing.

If you are one of those who omitted a deduction, you still can claim it by filing Amended Tax Returns. We can help you file your amended return. Call us at (415) 387-0500 for appointment.


Common Taxpayer's Mistakes
nd along with taxes come taxpayer errors. Please review these common taxpayer mistakes. Mistakes can result in penalties or a delay in your refund.

No Head for Figures
Addition and subtraction errors account for the greatest number of mistakes on tax returns. The IRS checks the math, so you can be sure these mistakes will be caught. If you've transferred figures incorrectly from one schedule to another, you'll receive a correction notice. If you've underpaid as a result of the error, you'll also receive a bill for the underpayment amount, interest, and possible penalty.

Your Basis in the Investment
If you've sold an investment or your mutual fund reports a taxable distribution, you have to determine your gain or loss and pay any taxes that are due. To do that, you need to know your "basis" in the investment — what you originally paid for it. Many factors can complicate this, including stock splits and spin-offs. If you own a mutual fund, your basis increases by the amount of reinvested capital gains. Not tracking investment basis accurately is another taxpayer mistake.

You're Supposed to Report That
Interest and dividends you earn on savings accounts and other taxable investments are reported to the IRS by the institutions that issue them. If you forget to list the income on your tax return, chances are the IRS will send you a notice of any taxes due.


Taxes on Mutual Funds
any investors don't realize that taxes can be one of their large costs when they invest in a mutual fund. Not only are you taxed when you receive a capital gain, but you also are taxed when the investment manager sells fund securities for a gain, even if the fund's value has declined. No wonder investors are confused.

To clear up the confusion, the SEC has issued new rules on how mutual funds must report their after-tax returns. The fund prospectus will now show the one-, five-, and ten-year after-tax returns, as well as the before-tax returns. Once you see just how a fund is affected by taxes, you can compare that fund to other mutual funds of a similar type. Some funds are more tax-efficient than others. Knowing the effect taxes have on your mutual fund return can help you choose the investments that are right for you.