Looking to make donations before the end of the year?

If you are thinking about giving to a charity, time is running out to give and still include the contribution on your 2009 tax return. All donations must be made by December 31 to be claimed on this year’s tax return when you file in early 2010.

Several important tax provisions have taken effect in the past few years, here are some of the notables to be aware of:

Special Charitable Contributions for Certain IRA Owners

This provision is set to expire at the end of 2009. Currently, it allows IRA owners who are age 70 1/2 or older to directly transfer up to $100,000 tax-free, to an eligible charity. This provision is available for distributions from IRAs, regardless of whether the IRA owner takes itemized deductions or not. It is important to mention this provision does not apply to employer-sponsored pension plans and SEPs (simplified employee pension plans). Amounts transferred are not taxable and no deduction is available for the transfer. Not all charities are eligible, so check Publication 590 for more information on eligible charities.

Rules for Clothing and Household Items

To donate clothing and/or household items to a charity, the items must be in good used condition or better. Any item a taxpayer is claiming a $500 or more deduction on does not have to meet this criterion, provided they have a qualified appraisal of the item attached to their tax return.

Guidelines for Monetary Donations

For all monetary donations, the taxpayer must have a bank record or a written communication from the charitable organization showing the name of the charity, date and amount of the contribution. Credit card statements, bank or credit union statements or copies of cancelled checks all count as bank records. If the donation is made through payroll deduction, a pay stub or W-2 should show the amount of the contribution.

Helpful Reminders from the IRS

- Contributions are deductible in the year made. If you charged a donation at the end of 2009, but are not going to pay your credit card bill until 2010, you may still claim the deduction in 2009.

- Only donations to qualified charities are allowable as tax deductions. If you are not sure about the status of the charity you want to support, check IRS Publication 78.

- For individuals, only taxpayers who itemize on Form 1040A can claim deductions for charitable contributions.

- For all donations of property, including household goods and clothing, make sure to get a receipt from the charity that includes the name of the charity, date of donation, and a reasonably detailed description of the donated property.

- The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500.

- If the total of a taxpayer’s deduction for all non-cash contributions is over $500, a properly completed Form 8283 must be submitted with the 1040A.

Make sure to follow the IRS’ guidelines when deducting your charitable donations. For more information, refer to IRS Publication 526.

Posted by JK Harris & Company

What Happens to a Tax Refund when Back Taxes are Owed?

Are you still paying off back taxes, but find you are entitled to a refund this year? This is not an uncommon situation for taxpayers to find themselves in. Whether you are in the middle of paying on an installment agreement or filing for an Offer in Compromise, you need to be aware of what happens to your refund when you owe the IRS back taxes.

It is more or less common sense the IRS is not going to refund your money when you owe them money. The IRS will keep your refund and apply it toward the balance you owe them. Although this may seem like a “bummer,” the truth is this is really good news for you. Why is it good news? Because it means your tax debt is going to be paid off that much sooner. If you’ve been paying on your debt for a while, then this can be a great relief and that relief can be better than actually getting a refund. Look at it this way: your money is going to go to pay off your tax debt one way or another, so you’re really not missing out on any extra money.

If your refund amount exceeds the balance you have left on your taxes, you will get the difference as a refund. There is a double benefit here; you have settled your back tax debt and put some cash back in your pocket.

In recent years, there have been several stimulus payments issued by the IRS. You must keep in mind is that any stimulus payments that you receive will also be used to satisfy your tax debt. If you still owe the IRS $500 and your stimulus payment is for $600, your refund check will be for $100. If you go to the IRS website and check the amount of your stimulus payment, it will show that you are getting the entire $600 stimulus amount because technically, you are. The IRS awarded you the entire stimulus amount, but they had withheld some of it in order to satisfy the debt you owed to them. It is important to remember this when you file your next tax return. When your next tax form asks if you received a stimulus payment, you must list the entire amount of the stimulus, rather than the amount of your refund check.

What happens if you end up owing again? You will have to continue to paying the current tax you owe and also satisfy the current tax period. Chances are, you may need to do this through an installment agreement. If there another stimulus payment comes through in the future, your stimulus payment will again be used to satisfy all tax debts you owe. If your tax debt exceeds the amount of your stimulus payment or future tax refunds, you will still have to pay your debt, as agreed. The only difference is that your balance owed is reduced, shortening the period of time you will have to pay the back taxes.

Just remember, when you owe back taxes and are issued a refund or a stimulus payment from the IRS you are not going to get the entire amount. In other instances, you may not get any of the money. But the bright side is the fact your obligation to the IRS is reduced. And it will be a huge relief when you pay off the IRS because you will have repaid your debt and are free of the stress owing tax debt to the IRS can bring.

Posted by JK Harris & Company

JK Harris Client Thankful to Remain in Her Home

In today’s tough economy, we have seen many taxpayers withdraw funds from their 401K account, but not have taxes withheld. Recently, we received a glowing testimonial from a satisfied client, Cynthia Reha, who came to JK Harris after having made this mistake herself. Eventually, the IRS came calling for the back taxes our client owed and the amount – over $66,000 – was more than she could afford to pay. Her situation had drastically changed and she was now disabled and receiving Social Security income.

Our client tried hard to get right with the IRS, but she could not get the IRS to set up payments she could actually afford, due to the large liability she had incurred. Ms. Reha found JK Harris and put her fate in our hands.

After much diligence on the part of her Case Specialist, it was determined the IRS had not allowed our client a vehicle allowance, when determining her monthly disposable income. (This would be the amount of money the IRS says the client had left over each month to repay the IRS.)

Ms. Reha then had to apply for and be turned down for, at least two home equity loans, before the IRS would acknowledge the client could not afford a large payment. What many people do not realize is that the IRS will expect you to tap the equity in your home – or any other assets – if you have it available to you.

Because our client could not borrow against the equity in her home, the IRS agreed to smaller, more manageable payments. After being afraid the IRS might take her home to repay her tax debt, Cynthia is able to live in her home, repay her tax debt at a rate she can afford, and she can rest easier.

In her testimonial, Ms. Reha said “Honestly, I did not think JK Harris and Company could rescue me, but they did.”

We’re glad we were able to help.

JK Harris Launches More Client Friendly Website and New Corporate Website

Recently, we launched our new and improved consumer tax resolution website, which has a fresh, updated appearance. The website is still located at www.jkharris.com and the website was redesigned to be more consumer friendly. What this means is the new version was designed to be easier to navigate and it offers updated information on our tax resolution services.

The website now features an easy link at the top of all pages for our current clients to send a message to the company with any questions they may have about the progress of their tax resolution case. Before, the link to email the company was often difficult for our clients to find on our old website. Now, this simple change assists our clients in contacting us when they need to reach us about their tax resolution case.

Updating our previous website was a cost-effective way to continue to advertise our services on the Internet, while maintaining a fully functional website with information on settling back tax debt, tax resolution resources, and company contact and office location information for both clients and prospective clients alike.

In conjunction with the redesign of our old website, our web design team also created a corporate website for us, located at www.jkharris-company.com. Like many other large companies, we wanted to create a corporate website that offers information to anyone outside of JK Harris who may be seeking information about the company itself, rather than the services we provide.

Our corporate website offers information about our company and its history, our employees, our views on social responsibility, careers with JK Harris, as well as information for the media.

I hope you will take a few minutes to look at both of our new websites to see if we can assist you in any state or IRS back tax issues you may have!