Can I Deduct Non-Cash Property Given to Charitable Organizations?

This entry discusses the tax deductibility of giving non-cash property to a charitable organization.

The focus of our practice is assisting taxpayers with complex financial issues, including financial management, tax return preparation, tax planning and civil taxpayer representation. Many taxpayers contribute to charitable causes and deduct that contribution on Schedule A of their annual tax return. When giving non-cash, some different rules come into play.

As with a cash contribution, in order to be tax deductible, the donation must be made to a qualifying charitable organization and not to an individual. You can generally deduct the fair market value of property given to qualifying organizations. If the contribution is worth $250.00 or more, a written acknowledgment must be provided by the charity and should include the date of the donation and a description of the items donated. It is also a good idea to take a picture of the donated items in case you need to defend your estimated fair market value in an IRS audit. If you are donating an appliance, it is a good idea to have the receiving organization test the appliance and indicate that it is in working order on the written acknowledgment. This is important because a working appliance is worth more than an inoperable one, which means a large tax deduction.

If a total of $500.00 or more of non-cash property is donated, a Form 8283, Noncash Charitable Contributions, is required to be filed with the tax return. If the fair market value of the item donated is more than $5,000.00, a qualified appraisal of the non-cash property is required.

Giving items of property that you are not currently using to a charitable organization is a good way to help a qualified organization. While you are at it, take advantage of the tax deduction. Just make sure that you have the receipts that you need to defend a deduction if challenged on audit. It is much easier to get the proper receipt at the time of the donation than trying to go back a year or more after the fact to get one. You may find that the charity is more motivated to help you with the receipt requirements at the time of the donation.

If you have any questions about charitable donations or other tax issues in Peachtree City, Georgia and Fayetteville, Georgia or surrounding areas, please feel free to contact me at (770) 598-9137 or by email at jedwards@edwardscpa.com.

Jeff Edwards, CPA
Jeffrey S. Edwards CPA, LLC
125 Flat Creek Trail, Suite 140
Fayetteville, GA 30214
(770) 598-9137
jedwards@edwardscpa.com
http://www.edwardscpa.com

Taxpayer Identity Theft: What is an Identity Protection Personal Identification Number?

This entry discusses the use of an Identity Protection Personal Identification Number (IP PIN) on tax returns to prevent someone from fraudulently obtaining your tax refund.

The focus of our practice is assisting taxpayers with complex financial issues, including financial management, tax return preparation, tax planning and civil taxpayer representation. Tax return identity theft is a fast growing problem across the nation.

Tax return identity theft occurs when someone steals personally identifiable information related to a taxpayer and then files a false tax return before the taxpayer files their official tax return. The taxpayer generally becomes aware that there is a problem when their tax return is rejected by the IRS as a duplicate filing.

In a recent report, the Treasury Inspector General for Tax Administration (TIGTA) noted that the IRS began issuing IP PINs to eligible taxpayers in fiscal year 2011 to help victims of identity theft. Use of the IP PIN on a tax return allows the IRS to process a taxpayer’s tax return without delay and helps prevent the misuse of a taxpayer’s Social Security Number on fraudulent tax returns.

The IRS issued 1.2 million IP PINS to taxpayers in 2014 to use in filing their tax returns, up from 770,000 in 2012. A taxpayer who has been the victim of taxpayer identity theft can use an IRS process that enables them to validate that they are who they say they are and in return receive an IP PIN to use on their tax return. There is movement underway to allow taxpayers who have been notified that their personal information was disclosed to also obtain an IP PIN.

Once someone becomes a victim of this type of fraud, it can take many months and a lot of time to get things straightened out. Protect your personal information such as Social Security Numbers to help guard against becoming a taxpayer identify theft victim.

If you have any questions about tax identity theft or other tax issues in Peachtree City, Georgia and Fayetteville, Georgia or surrounding areas, please feel free to contact me at (770) 598-9137 or by email at jedwards@edwardscpa.com.

Jeff Edwards, CPA
Jeffrey S. Edwards CPA, LLC
125 Flat Creek Trail, Suite 140
Fayetteville, GA 30214
(770) 598-9137
jedwards@edwardscpa.com
http://www.edwardscpa.com

What is a Substitute For Return that the IRS can file on behalf of a taxpayer?

This entry discusses the IRS Substitute for Return process.

The focus of our practice is assisting taxpayers with complex financial issues, including financial management, tax return preparation, tax planning and civil taxpayer representation. There are taxpayers in Peachtree City, Georgia and Fayetteville, Georgia that believe that if they do not file a tax return, somehow the IRS will not notice them. It may take some time, but the IRS will catch up.

If a taxpayer is employed and receives a W-2, is self-employed and receives a Form 1099-Miscellaneous, earns interest on a bank account or sells mutual funds in a brokerage account, the IRS receives a copy of these documents. Through a computer matching program, reporting discrepancies are easily detected.

If the taxpayer does not file a required income tax return, the IRS is authorized under Internal Revenue Code §6020(b) to prepare a Substitute for Return (SFR) on the taxpayer’s behalf and will assess the tax due along with penalties and interest. If a taxpayer does not pay the assessed tax, they will be placed in the IRS collections process to collect the assessed tax.

While a taxpayer can take tax deductions on their tax return for allowed expenses, when the IRS creates an SFR, there are no tax deductions allowed other than the standard deduction and personal exemption. A return can be filed by the taxpayer to replace the SFR. However, if there is a tax refund due that is over three years old, the tax refund will be forfeited by the taxpayer – it cannot be rolled into future years if there happens to be a tax liability on several years of returns that are missing.

It is always better to file all income tax returns when they are due. The IRS will step in and help in their way if the taxpayer does not take the initiative. There will be penalties and interest assessed for not filing tax returns when they are due – extra money paid that does not have to be. While other income taxes can possibly be discharged in bankruptcy, once an SFR is created for a tax year, that year’s tax liability is never dischargeable in bankruptcy.

If you have any questions about filing past due income tax returns or other tax issues in Peachtree City, Georgia and Fayetteville, Georgia or surrounding areas, please feel free to contact me at (770) 598-9137 or by email at jedwards@edwardscpa.com.

Jeff Edwards, CPA
Jeffrey S. Edwards CPA, LLC
125 Flat Creek Trail, Suite 140
Fayetteville, GA 30214
(770) 598-9137
jedwards@edwardscpa.com
http://www.edwardscpa.com

Part 6 of 6 Tax Questions That Arise in Divorce: Who is Responsible to Pay Tax Debts?

When a married couple has been filing with a married-filing-joint status on their annual tax returns, both are joint and severally liable for the related tax liability. This blog discusses these specific tax liabilities.

The focus of our practice is assisting taxpayers with complex financial issues, including financial management, tax return preparation, tax planning and civil taxpayer representation. A large number of married couples use the married-filing-jointly tax return status due to available tax breaks and favorable tax rates. When the married-filing-jointly status is used, both taxpayers are jointly and severally responsible for the related tax liability. In layman’s terms, this means the IRS can use either of the taxpayer’s income/assets to settle an outstanding liability related to that specific married-filing-jointly tax return.

In divorce, it is common to include a clause in the legal instrument regarding who is responsible for paying tax liabilities. The thing to remember is that the IRS does not care about that document when it comes to outstanding tax liabilities. They are legally able to levy either of the spouse’s assets to settle the debt. It is then up to a spouse to seek civil remedies to obtain reimbursement from the offending spouse.

The tax law does allow for innocent spouse relief if specific criteria are met. This could remove the innocent spouse from being responsible for the outstanding tax debt.

As with many tax situations, the correct answer to a tax-related question depends on the situational specifics of the taxpayer. The above is not tax advice for a specified situation. Taxpayers should consult a tax professional to determine the correct answer for their specific situation.

If you have any questions about tax items to consider during and after divorce, or other tax issues in Peachtree City, Georgia and Fayetteville, Georgia or surrounding areas, please feel free to contact me.

Jeff Edwards, CPA
Jeffrey S. Edwards CPA, LLC
125 Flat Creek Trail, Suite 140
Fayetteville, GA 30214
(770) 598-9137
jedwards@edwardscpa.com
http://www.edwardscpa.com

Part 5 of 6 Tax Questions That Arise in Divorce: Are Legal Fees Paid in Divorce Tax Deductible?

Some of the legal fees paid to an attorney to effect a divorce are deductible, but others are not.

The focus of our practice is assisting taxpayers with complex financial issues, including financial management, tax return preparation, tax planning and civil taxpayer representation. Legal fees and court costs for getting a divorce are not deductible. However, there is an exception.

Legal fees incurred directly involved in securing alimony are tax deductible. In addition, fees paid to appraisers, actuaries and accountants for services in determining the correct tax amounts and helping to obtain alimony are also tax deductible.

Expenditures for personal advice, counseling or legal action in a divorce are not tax deductible. If one spouse pays the other spouse’s legal fees (unless they are required in the divorce/separation instrument), the payment is considered a gift and may be subject to the gift tax.

As with many tax situations, the correct answer to a tax-related question depends on the situational specifics of the taxpayer. The above is not tax advice for a specified situation. Taxpayers should consult a tax professional to determine the correct answer for their specific situation.

If you have any questions about tax items to consider during and after divorce, or other tax issues in Peachtree City, Georgia and Fayetteville, Georgia or surrounding areas, please feel free to contact me.

Jeff Edwards, CPA
Jeffrey S. Edwards CPA, LLC
125 Flat Creek Trail, Suite 140
Fayetteville, GA 30214
(770) 598-9137
jedwards@edwardscpa.com
http://www.edwardscpa.com

Part 3 of 6 Tax Questions That Arise in Divorce: Do Payments Between Spouses Impact Taxes?

Upon divorce, there is usually the splitting of the couple’s assets. Sometimes the payments received are taxable income, but sometimes they are not.

The focus of our practice is assisting taxpayers with complex financial issues, including financial management, tax return preparation, tax planning and civil taxpayer representation. Generally, when a person receives money or property from another person, there is a taxable transaction that is required to be included on the tax return as income. When dealing with divorce, it is a little different.

The division of property between spouses is not a taxable event. However, if there is alimony being paid, the amount received is included on the receiving taxpayer’s tax return as income and on the paying taxpayer’s tax return as a reduction of income. Payments from one taxpayer to the other taxpayer for child support are neither taxable income to the recipient nor a tax deduction to the payer. The question is whether the splitting of assets represents a division of property (potentially tax impacting), child support (not tax impacting) or alimony (tax impacting). The tax code provides detail on the characteristics of each of these items.

When working through the divorce discussions with an attorney, it is important for each of the involved taxpayers to understand the tax impact of what they are agreeing to. If a tax-deferred retirement asset is assigned to one taxpayer and an equal amount tax-free asset is assigned to the other taxpayer, the taxpayer receiving the tax-free asset probably received a much better deal. While the first taxpayer loses part of the asset through income taxes when cash is ultimately received, the second taxpayer pays no taxes at all on their tax-free asset – ever. It is important to have a tax knowledgeable person on the team to help the taxpayers know the bottom line cash impact of what they are agreeing to.

As with many tax situations, the correct answer to a tax-related question depends on the situational specifics of the taxpayer. The above is not tax advice for a specified situation. Taxpayers should consult a tax professional to determine the correct answer for their specific situation.

If you have any questions about tax items to consider during and after divorce, or other tax issues in Peachtree City, Georgia and Fayetteville, Georgia or surrounding areas, please feel free to contact me.

Jeff Edwards, CPA
Jeffrey S. Edwards CPA, LLC
125 Flat Creek Trail, Suite 140
Fayetteville, GA 30214
(770) 598-9137
jedwards@edwardscpa.com
http://www.edwardscpa.com

Part 2 of 6 Tax Questions That Arise in Divorce: Who Can Claim the Kids as a Dependent?

The determination as to who is eligible to claim the children as a dependent both during and after divorce has some complexities.

The focus of our practice is assisting taxpayers with complex financial issues, including financial management, tax return preparation, tax planning and civil taxpayer representation. The question of who can claim a child as a dependent during and after a divorce has some complexities. The answer is “it depends.” Consult a tax specialist to discuss your situational specifics to decide. Following are some things to consider when it deciding which parent can claim the dependent:

1. Does the child meet the overall dependency requirements for either parent to claim the dependent exemption?
2. Who did the child stay with the most nights during the year?
3. If the same number of nights with both parents, who has the highest Adjusted Gross Income (AGI)?
4. Has someone been awarded legal custodianship of the child?
5. Has the custodial parent released the claim of the exemption to the non-custodial parent?

The custodial parent has the right to claim the exemption for a qualifying child on their tax return. By default unless legally determined by divorce decree, the number of nights that the qualifying child spent with each parent is an important test in determining the custodial parent. If the number of nights spent with both parents is exactly equal, the tie-breaker is to look at which parent had the highest AGI with the highest AGI getting the dependency deduction of a qualifying child.

In divorce, one parent is declared the custodial parent and has the right to claim the exemption for a qualifying child on their tax return. The custodial parent has the right to relinquish the right to that exemption to the non-custodial parent for a single year or a series of future years. However, specific steps must be taken to satisfy the IRS’ requirements for relinquishing that right. One thing you will note is that the answer does not depend on who filed their tax return first claiming the exemption. Improper claiming of the exemption can lead to tax liability adjustments and penalties if/when challenged by the legitimate exemption owner.

As with many tax situations, the correct answer to a tax-related question depends on the situational specifics of the taxpayer. The above is not tax advice for a specified situation. Taxpayers should consult a tax professional to determine the correct answer for their specific situation.

If you have any questions about tax items to consider during and after divorce, or other tax issues in Peachtree City, Georgia and Fayetteville, Georgia or surrounding areas, please feel free to contact me.

Jeff Edwards, CPA
Jeffrey S. Edwards CPA, LLC
125 Flat Creek Trail, Suite 140
Fayetteville, GA 30214
(770) 598-9137
jedwards@edwardscpa.com
http://www.edwardscpa.com

Do You Want to Learn About Film Industry Accounting and How it Differs from Mainstream Accounting?

This post discusses the uniqueness of film industry accounting and how to learn more.

As an accounting/finance professional I had the same question. Nine feature movies were filmed in Georgia in 2013 and as the film industry grows in Georgia and with the opening of Pinewood Atlanta Studios in Fayetteville, Georgia, I wanted to learn more about film industry accounting to better serve clients in the industry.

I began my search on the internet and found John Gaskin, a seasoned accounting and finance professional in the film industry. I began with his recorded online courses for accounting professionals and I was impressed with how John was able to succinctly point out film accounting differences. I learned about the industry’s standard cost report and the accounting principles used to create it. I could tell that John had a lot to share, so I found myself heading to Toronto, Ontario to learn from him in person.

While in Toronto, I attended John’s Film Accounting 101 class and learned not only about the film accounting process, but John also provided a learning-lab environment with specific direction and practice on the film industry’s standardized accounting document filing protocols and processing/recording financial transactions in industry-specific accounting software. There are unique challenges in the film industry as the accounting team changes for each production, so understanding the standardized processes utilized across the industry is critical to get up to speed quickly on a new film production.

I also spent time in John’s U.S. Film Payroll training. The film payroll is union-work-rules driven and there are many unique twists and turns that an uninitiated accountant will not know without training. Using his hands-on approach, John’s payroll training was a learning-lab with an abundance of practice and guidance. Whether dealing with the SAG, IATSE National Low Budget, or IATSE Area Standards union contracts, John covers them.

I recently learned that John is bringing his Film Accounting 101 and US Payroll training to Atlanta, Georgia in early 2015. If you are in the Atlanta area and are interested in learning more about the uniqueness of film accounting/payroll and obtain tips on how to pursue film industry accounting positions, I encourage you to take advantage of this unique learning opportunity with John. I can attest that he is very knowledgeable, professional and has the ability to teach. It was time well spent for me! On top of that it answered my question, “How does film industry accounting differ from mainstream accounting?” I fully recommend John and his training to those who want to learn more. Click through to his website for more information.

John Gaskin Productions – www.talkfilm.biz or email to Helene@talkfilm.biz.

If you have any questions about John and his approach, please feel free to contact me at jedwards@edwardscpa.com.

Jeff Edwards, CPA
Jeffrey S. Edwards CPA, LLC
125 Flat Creek Trail, Suite 140
Fayetteville, GA 30214
(770) 598-9137
jedwards@edwardscpa.com
www.edwardscpa.com