The IRS Deductions Blog

Posts Tagged ‘donation’

Question: Hail damage to my car and the deductible?

I was in a hail storm and received hail damage to my car, my deductible is $500.00 dollars; instead of my insurance company sending me 1872.00 they sent me 1372.00 but when i took my car to the repair shop they told me that i owe them a 500.00 deductible as well. Why did i have to pay 500.00 to the insurance company and 500.00 to the car repair place? I feel like i paid a 1000.00 dollar deductible.

Answer: You didn’t pay the deductible twice. The company deducts the $500 from the damage amount and you pay that to the shop when you pick up the car.

Out of the $1872 you should pay only $500. This leaves a balance of $1372 which the company has paid. So everything is cool. Just pay the $500 to the shop and everybody will be happy.

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Market aligned right for new-car shoppers

– It’s the most wonderful time of the year for buying a new car.

Car Insurance : How to Calculate a Deductible for Car Insurance

In November 2009, the IRS began a new National Research Program Initiative (the Initiative): an industry wide detailed random audit of employment taxes for 6,000 employers during the course of the next three years. The purpose of the Initiative is dual fold: (1) assess systemic employment tax compliance; and (2) collect assessments from delinquent employers.

With diminishing tax revenues due to the depressed economy, the U.S. Treasury Department is stepping up efforts to decrease the tax gap between overall tax liabilities and taxes paid to the Internal Revenue Service. Auditing employment taxes is seen by the IRS as a necessary method of closing this tax gap. For tax year 2001 for example, the gross tax gap was estimated by the IRS at around $345 billion, with underreporting of employment taxes accounting for around 17% of the tax gap.

The IRS will audit businesses to ensure that Federal withholding taxes are deducted and paid over to the government from employees wages for Social Security and Medicare as well as Federal Unemployment taxes. An employer found to be in noncompliance could face stiff civil penalties and interest on unpaid taxes. These penalties could have a particularly severe impact on small business owners.

The IRS has prioritized four areas to focus their auditing efforts under the Initiative, including:

Worker Classification: i.e. whether an employer properly classifies an employee as an employee or independent contractor for tax purposes. Determining which depends on the behavioral, financial and type of relationship the company has with the person performing the work.

Employee Fringe Benefits: A fringe benefit is a form of pay for the performance of services. i.e. benefits such as insurance coverage, company car or child care, etc. that are provided by employers tax free to employees but not to independent contractors.

Reimbursed Business Expenses: e.g. reimbursement for taking a client to lunch, purchasing office supplies: which requires a written business expense plan. I.E. You must have paid or incurred expenses that are deductible while performing services as an employee. You must adequately account to your employer for these expenses within a reasonable time period, and you must return any excess reimbursement or allowance within a reasonable time period.

Compensation of Owners who are also employees of the company, whereby unpaid taxes may result in personal liability for the employer.

It has been reported that the IRS has already commenced with the process of selecting entities for audit of their employment taxes now that the employment tax audit Initiative has begun. Severe consequences wait for employers who are in noncompliance with the employment tax laws. Businesses are highly encouraged to make sure procedures are set to adhere to the applicable tax laws. Doing so can thwart much headache, and the loss of money and productive office time in the event of an audit.

For example, the Internal Revenue Code requires a written reimbursement plan in order to take advantage of the tax benefits of legitimate business expenses. Employers should consider consulting with experienced counsel in preparation for the Initiative and in the event of an audit of their employment taxes.

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IRS To Take On Karl Rove? Tax Laws Could Take A Bite Out Of Secret Political Spending

WASHINGTON — Top Republican political strategist Karl Rove’s method of secretly funneling unlimited contributions from big donors was so hugely successful in the 2010 campaign that Democrats are now trying to copy it. But his model may yet end up backfiring spectacularly.

Legitimate Charity Drive to Counteract VFX’s Faux Charity Drive

Question: I was in a car wreck in 2008, car got totaled. What documents I need to have to get tax deduction?

I got the police report of the accident and then sold the car to junk yard for 100 bucks (cash, no receipt). Then returned the license plate to DMV office, have their receipt. No insurance documents, as I only had liability insurance. I guess I can pull over fair market value of car from KBB. Can I go ahead and apply for loss deduction?

Answer: You have a casualty loss which may or may not be deduct-
ible depending on your situation. Are you filing Schedule A to
itemize your deductions already? The casualty will need to
exceed 10% of your gross income for it to be deductible on
Schedule A, and then your total deductions on Schedule A
need to exceed the Standard Deduction for your filing status.
The amount of the loss you can claim is calculated by compar-
ing the original cost of the car with the fair market value at the
time of the accident and taking the lower of the 2 numbers (I’m
thinking almost surely the FMV is lower)-the loss is then the
difference between that number (FMV) and the $100 you got for
the car from the junk yard. That number must be over 10% of
your 2008 income to qualify.
In other words, the IRS makes it very difficult for folks to claim
Casualty/Theft deductions.

Robyn M.
Enrolled Agent
Master Tax Advisor

**This advice was prepared based on our understanding
of the tax law in effect at the time it was written as it applies
to the facts that you provided

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Donations Can Help Others, And Your Tax Return

Time’s running out to donate and help your community, while at the same time benefiting on your tax return.

OLPC Give One Get One – Extended Through 12/31/07

In last one decade, the information technology has significantly transformed companies in running their businesses. One of the telecommunication innovations is 0800 numbers, which have been a very successful solution for the companies for communication purpose. For the non-government organizations (NGOs), 0800 numbers have been quite useful tool in order to run their social and welfare activities.

According to charity commission, there are more than 167,000 registered charity based organizations, all looking for innovative ways to attract customers who are willing to donate. 0800 numbers have made life easier for charity purpose.

Free 0800 numbers can be used for various advertising mediums such as donation campaigns and telephonic charities. As most of the people considers 0800 numbers reliable, charity based organizations using 0800 numbers are also considered trustworthy as well. Since 0800 numbers are free of charge, it was found that customers are 185% more willing to dial free 0800 numbers than the chargeable ones thereby increasing the chances of getting hits. This is one the reasons why many organizations prefer using telephonic charities for fund raising.

The telephonic campaigns on TV channels have been very successful in generating funds for disasters such as Tsunami in Asia (2004), Earthquakes etc. Another reason to choose 0800 numbers for charity purpose is using short code SMS services for attracting customers. 5 digit mobile short codes e.g. text donate to 12345 can be used to target customers who are more likely to be on the move or only use mobile phones for their communication purpose.

The donators can also send their contributions via SMS. Thus, along with the other tangible benefits of 0800 numbers, they can also be used for noble and social welfare purpose as well.

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Goodwill, others benefit from post-holiday donations

As people start clearing out their closets and donating unwanted goods to charity, places like Goodwill are reaping the rewards of the holiday season.

Charity Navigator’s Tax Tips: Document Monetary Donations