Pointers for deducting charitable donations

Very recently I was asked some questions about charitable donations or contributions and tax returns. So I figured if one person needed answers, I’m sure there are many others who could benefit from these answers as well.

And, I thought the easiest way is to do a sort of “Frequently Asked Questions” blog. I hope this helps clear up any confusion. So, here goes.

Question: If I go with a standard deduction and make non-cash donations, can I still deduct them from my income?

Answer: No. Unfortunately, you can only use these donations as a deduction if you itemize on Form 1040, Schedule A.

Question: Can I make donations before April 15 and still deduct them from the tax year 2007?

Answer: No. Only donations and contributions made during tax year 2007 can be deducted. So the donation needed to be made on or before Dec. 31, 2007.

Question: Can I deduct contributions made to a political organization or candidate?

Answer: No. Contributions made to specific individuals, political organizations or candidates are not deductible. And, you cannot deduct the value of your time or services donated. Deductible contributions must be made to qualified organizations.

Question: What if I donate $300 to a qualified organization?

Answer: You can claim the deduction for individual contributions of $250 or more if you obtain a written acknowledgment from the organization.

Question: How can I claim the deduction for donating a refrigerator and stove?

Answer: Clothing and household items must be in good, used condition or better in order to be a deductible item.

Question: How do I come up with a value for property I want to donate?

Answer: If you have stock or property you want to donate, the fair market value of the stock or property is used.

For more information on charitable contributions, you can visit www.irs.gov.

It’s easy to find out if you qualify for the Earned Income Credit

Ralph Havens, Director of Professional Services

It’s tax time again and you have probably heard of the Earned Income Credit, but how do you know if you qualify? The Earned Income Credit, or EIC, is available to people who work, but have lower income. Some taxpayers are eligible for a tax credit of up to $4,700!

It’s much simpler than you realize to determine if you qualify for this credit. The IRS website offers easy to use tax tools, which take the guesswork out of the EIC. The EITC Assistant is available here: http://apps.irs.gov/app/eitc2007/SetLanguage.do?lang=en. The EITC (Earned Income Tax Credit) Assistant is an interactive tool that simplifies the process of determining if you qualify for the tax credit. With the EITC Assistant, you answer a few simple questions about yourself, your children, your living situation, and your income to figure out if you qualify. The Assistant will then estimate the amount of EIC you qualify for. It’s that easy!

It is important to note the Earned Income Credit is based on income and whether or not you have qualifying children. There are other qualifying factors, so it’s important to read up on this credit with Publication 596 from the IRS or talk to a tax professional.

Ralph Havens was named the Director of Professional Services in June 2007 and has been with JK Harris since 2003. He heads up JK Harris’ Audit, Tax Preparation and E-File departments. Ralph has been an Enrolled Agent for 14 years and his special area of concentration is in audit representation.

Couple took the right turn when they came to JK Harris

When you owe the IRS, it can seem like you are in a maze. You turn here and turn there but still seem to end up nowhere. David and Gloria Baker of LaGrange, ME, were in that same situation. They owed the IRS nearly $42,000 and didn’t know where to turn next.

I am so glad they saw our commercial on TV and decided to call us for help because we were able to negotiate a settlement with the IRS. The Bakers owed back taxes for just one year.

However, neither of them was employed, and both were living on monthly Social Security. The IRS took into account the little money the Bakers had on hand and some equity in their vehicle and accepted an Offer in Compromise of just over $5,000.

“We really don’t know what we would have done without them,” the Bakers said. “They took care of everything. We have so much trust in them…They were a Godsend. I thank them everyday for what they did.”

Thank you, Mr. and Mrs. Baker. I am so pleased we were able to help.

Budgeting is simply being prepared

Wayne Lefor – Financial Planner, JK Harris Advisors, LLC

Most people have a grand plan for themselves. It usually involves making lots of money and living happily ever after. Unfortunately, that grand plan doesn’t pan out for everyone, whether you make lots of money or not. There are usually some unexpected events that pop up and spoil even the best of plans.

Now the question is, how do you prepare for the unexpected?

You budget, of course. You see, a budget is nothing more than a financial plan for spending. Budgeting is a fairly simple process that involves these six steps: establish your goals, estimate your monthly household income, estimate your monthly expenses, balance the budget, put you plan into action, and adjust the budget as necessary.

I know what you are thinking. You’re thinking, “OK, what’s so simple about that?”

Well here are some tips that can help make budgeting a little easier.

• Keep it simple. Don’t detail your plan to the penny.

• Be realistic. Take into consideration all expenses, including vacations, spending money, alcohol, tobacco and hobbies. Overestimate your expenses and underestimate your income.

• Don’t expect someone else’s budget to work for you. Tailor a spending plan to your individual needs, not to something you see in a newspaper or magazine.

• Distinguish between wants and needs. Buy what you need first. The wants belong in the “what’s left over category.”

• Borrow with care. Even though it might give you pleasure to own something right now, consider all the interest you’ll be paying and as yourself if it’s really worth the price. If possible, use cash for ALL of your impulse purchases.

• Plan for and develop an emergency fund. This is perhaps the most important element of them all.

If you can follow these steps, you can develop a successful budget.

Wayne Lefor is a Financial Planner with JK Harris Advisors, LLC, which is an affiliate of JK Harris and Company, LLC. JK Harris Advisors provides financial planning services to help clients identify, establish and achieve their financial goals and objectives.

It’s thrilling to help taxpayers get some relief

I’ve seen this happen time and again. For one reason or another, a taxpayer hasn’t filed all of the required tax returns, and the IRS catches up with them. And, unfortunately, it happened to one of our clients recently.

As far as Joanna Martin was concerned, she was in good standing with the IRS. She was under the impression that all of her tax returns were filed and she didn’t owe a thing.

Unfortunately, the IRS didn’t agree and sent her notices claiming she owed them nearly $300,000 because they did not have four years of tax returns on file. In turn, the IRS filed a Substitute for Return for each of the four years. What that means is the IRS filed its own returns on Ms. Martin’s behalf, using only one exemption and just the standard deduction, no itemizing.

Fortunately, Ms. Martin came to us for assistance. We completed her missing returns, which lowered her balance due to just under $11,000 and got her set up with a monthly Installment Agreement she could afford to pay.

“I would recommend JK Harris to anyone with IRS issues,” Ms. Martin said.
Thank you, Ms. Martin. I am so thrilled we could help.

IRS offers free tax prep service to those in need

Teresa Thomas – Enrolled Agent

We all know about the IRS’ E-file, and how it allows you to prepare your tax returns on the Internet for free. But, there are some people who can’t take advantage of that program. Some taxpayers on the lower end of the income spectrum and some elderly taxpayers may not have access to a secure computer and don’t have the funds available to hire someone to prepare their tax returns for them.

If that is the situation you are in, and you are current and up to date with previous tax returns, you can take advantage of a free tax preparation service being offered by the IRS.
The Volunteer Income Tax Assistance (VITA) Program offers free tax help to those people who earn less than $40,000, while the Tax Counseling for the Elderly (TCE) Program offers free tax help to those age 60 and older. Volunteers at these sites are trained in tax law and help prepare basic tax returns. They can also help with special credits, such as Earned Income Tax Credit (EITC), Child Tax Credit and Credit for the Elderly.

The IRS has nearly 12,000 of these free tax preparation sites open nationwide during the tax season. And most of them will be using free electronic filing, which will enable you to receive your refund in half the time it would take if you mailed a paper return to the IRS.
The IRS has also teamed with the military to provide free tax assistance to military personnel and their families through the Armed Forces Tax Council (AFTC). Volunteers at these sites are trained address tax issues specific to military personnel, such as combat zone benefits.

For more information on these three programs, you can visit www.irs.gov.

Teresa Thomas is an Enrolled Agent and has been with JK Harris since 1999. She also worked as a tax preparer for a major tax preparation company for 25 years.

Drop me a ‘Tweet’ if you use Twitter

Some of you may be very familiar with Twitter, some of you may not. Twitter is a free Web-based site that offers elements of both instant messaging and blogging.  In 140 characters or less, you can tell the online world what you are doing in that instant in time.  Some people use it to keep up with their friends and family, others use it for work or to follow breaking headlines from credible news sources such as the Wall Street Journal or Fox News.  I have found it an easy way to reach out to taxpayers with helpful tax tips during the tax season.  I have been receiving good feedback from other tweeters about my posts. See my posts at: http://twitter.com/jkharris.

Surprisingly, other bloggers have discovered my tax ‘twittering’ and have posted blogs about the “twittering tax accountant.”  Although I am no longer an accountant (I retired my CPA license to grow my company, JK Harris and Company, LLC) If you are interested in what others have to say, here is what one blogger thought about my “tax tweets:” http://www.accmanpro.com/2008/01/24/twittering-tax-advisor/

I have several profiles online where you can find a variety of tax articles and tips that may help you with your taxes.  Visit me at on Squidoo at http://www.squidoo.com/jk-harris or on Digg at http://digg.com/users/jkharris07.

No more sleepless nights for this California man

I find it truly refreshing being able to help people in need save money. What makes it even better is when that person thanks you and states “my sleepless nights worrying about my taxes were dispelled when I got JK Harris on my side.”

I am so pleased that we were able to help save Richard Carlson of Yucaipa, CA, nearly $57,000 by negotiating an Offer in Compromise with the IRS. And that’s not all. We also helped him establish a monthly Installment Agreement with the California Franchise Tax Board to settle his state debt.

Like many, Richard was in a situation where he owed the IRS, interest and penalties were making the debt even worse, and he suffered a decrease in his monthly income. All of these things combined made it impossible for him to pay the IRS and the state of California.

That’s where we came in. We were able to establish the Installment Agreement with the state and then determine that Richard had no monthly disposable income after paying all of his usual monthly expenses.

He did have some equity in his vehicle and an insurance policy, which was used to come up with the number of $3,169 for his Offer. Thankfully, the IRS looked over his financial situation and agreed the best resolution for both parties was to accept the Offer amount.
Congratulations, Richard. You can now sleep tight, and we are really happy we could be a positive influence in helping you settle your tax issues.