Deductions and Documentation for Charitable Contributions
Mar 31, 2016
Before filing your 1040, you will need to compile the charitable contributions you made throughout the year. The IRS allows you to deduct both cash and noncash donations on your schedule A, along with other itemized deductions. There are specific rules for cash contributions. These can be made by way of a cash, check, electronic funds transfer, debit or credit card, or payroll deductions. You will need to keep proper documentation in case your contribution is questioned.
In order for your donation to be deductible, it must be donated to a “qualified” organization. These include nonprofit groups, public charities, and educational institutions. If you are unsure about the qualifications of an organization, you can use an IRS app to help you determine the validity.
If you donate to a charity but receive a benefit in return, such as dinner or merchandise, then you can only deduct the amount that exceeds the fair market value of the benefit. For example, if you pay $100 for an event and receive a dinner that is worth $30, then your deduction will be $70. That $70 is the difference between the $100 you paid and the $30 value of the dinner.
Various rules apply regarding documentation based on your donation being over $250. If your donation is under $250, all you need is a bank record, such as a print out of your monthly bank or credit card statement. You could also use a canceled check. If you cannot provide such, you may use a written letter from the charitable organization with your name, the amount donated and the date on which you donated. If you have a payroll contribution you can use your paystub, W-2, or a letter from your employer with the amount and date you donated. In addition, you may be required to present a pledge card or other documentation with the name of the charitable organization.
If your cash donation is over $250, you will required additional information above and beyond your bank statement. A written letter from the charitable organization along with a description of any goods or services provided will be obligatory. If you received any benefit from your gift, then the letter must state what was provided and the value of that benefit. You may deduct the net amount.
You do not have to combine separate donations to the same organization when determining if your gift is over $250. For example, if you make a monthly donation to the same organization of $40 for a total of $480 for the year, this is not considered a gift over $250. You are permitted to treat each donation separately. If you have two separate donations to the same organization which over $250 then you will need documentation for each.
If you require assistance in determining your contribution status or have questions about gifting to a local charity, please feel free to a William Vaughan Company representative today (419) 891-1040.
By: Brittany Jennings, Staff Accountant
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Ohio Department of Taxation Warns of Fraud Scheme
Mar 29, 2016
(Columbus, OH. / March 28, 2016) — The Ohio Department of Taxation (ODT)* today began alerting employers to the latest fraud scheme that is being reported nationwide. Over the past few weeks, payroll and human resources offices at various companies across the country, including some in Ohio, have received emails that appear to come from the CEO or other high ranking management official of the company. The emails seem to be a legitimate request for confidential payroll data. In fact, those emails are a phishing scheme by cyber criminals posing as company officers and fooling employees into providing detailed payroll and W-2 information that is then used to file fraudulent tax returns.
This scam has been worked on more than thirty companies resulting in the theft of W-2 tax information for thousands of current and former employees. The W-2 form contains an employee’s Social Security number, salary and other confidential data. This information enables thieves to create a realistic looking, but fraudulent tax return requesting a tax refund that is then filed with Ohio or other states, and the IRS.
Any Ohio company that has been the victim of or experienced this or any email phishing scheme should immediately contact ODT at 1-800-282-1780 so appropriate measures can be taken to protect against potential tax fraud and safeguard Ohio taxpayer dollars.
*http://www.prod.tax.ohio.gov/Portals/0/OhioTaxAlert/ArchivedAlerts/TaxFraudAlert.pdf
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Tax Break Extender Package Approved By Congress
Mar 24, 2016
At the end of last year, Congress continued its tradition of passing an “extender package.” Typically, the year-end packages extend various tax benefits for one year only, but this most recent legislation — the Protecting Americans from Tax Hikes (PATH) Act of 2015 — extended many benefits for longer periods, and in some cases, permanently.
Individuals
Following are some of the more important provisions affecting individual taxpayers:
State and local sales taxes. The new law permanently extends the provision allowing taxpayers to take an itemized deduction for state and local sales taxes rather than state and local income taxes. This provision may be useful to individuals who live in states with no income tax or who have purchased an expensive item, such as a car.
American Opportunity Tax Credit. Also made permanent is the tax credit of up to $2,500 per year for the payment of qualified tuition and related expenses for the first four years of post-secondary education. The credit is subject to phaseout based on income level.
Higher education expense deduction. This provision allows eligible individuals to deduct up to $4,000 or $2,000 (depending on income) of qualified tuition and related expenses. Because the deduction is “above the line,” taxpayers do not need to itemize to take it. The deduction is extended for 2015 and 2016.
Nontaxable IRA charitable transfers. Under this provision, now permanent, individuals age 70½ or older may exclude from gross income up to $100,000 per year for direct transfers from their individual retirement accounts to qualifying charities. If all requirements are met, such contributions also count toward the taxpayer’s required minimum distributions.
Businesses
Among other changes, the PATH Act of 2015 provides more generous write-offs for qualifying fixed asset purchases:
Higher Section 179 limit. Effective for the 2015 tax year, the new law makes permanent the $500,000 limit on the cost of machinery, equipment, and other eligible property that businesses may expense each year. The election is subject to a dollar-for-dollar phaseout once the cost of expensing-eligible property exceeds $2,000,000.
“Bonus” first-year depreciation. Thanks to the new law, businesses will continue to have the option of deducting 50% of the cost of qualifying property (e.g., most machinery and equipment) in the year the property is placed in service. The 50% “bonus” depreciation percentage is available for 2015, 2016, and 2017. The percentage drops to 40% in 2018 and to 30% in 2019.
Categories: Other Resources
Tax Break Extender Package Approved By Congress
Mar 24, 2016
At the end of last year, Congress continued its tradition of passing an “extender package.” Typically, the year-end packages extend various tax benefits for one year only, but this most recent legislation — the Protecting Americans from Tax Hikes (PATH) Act of 2015 — extended many benefits for longer periods, and in some cases, permanently.
Individuals
Following are some of the more important provisions affecting individual taxpayers:
State and local sales taxes. The new law permanently extends the provision allowing taxpayers to take an itemized deduction for state and local sales taxes rather than state and local income taxes. This provision may be useful to individuals who live in states with no income tax or who have purchased an expensive item, such as a car.
American Opportunity Tax Credit. Also made permanent is the tax credit of up to $2,500 per year for the payment of qualified tuition and related expenses for the first four years of post-secondary education. The credit is subject to phaseout based on income level.
Higher education expense deduction. This provision allows eligible individuals to deduct up to $4,000 or $2,000 (depending on income) of qualified tuition and related expenses. Because the deduction is “above the line,” taxpayers do not need to itemize to take it. The deduction is extended for 2015 and 2016.
Nontaxable IRA charitable transfers. Under this provision, now permanent, individuals age 70½ or older may exclude from gross income up to $100,000 per year for direct transfers from their individual retirement accounts to qualifying charities. If all requirements are met, such contributions also count toward the taxpayer’s required minimum distributions.
Businesses
Among other changes, the PATH Act of 2015 provides more generous write-offs for qualifying fixed asset purchases:
Higher Section 179 limit. Effective for the 2015 tax year, the new law makes permanent the $500,000 limit on the cost of machinery, equipment, and other eligible property that businesses may expense each year. The election is subject to a dollar-for-dollar phaseout once the cost of expensing-eligible property exceeds $2,000,000.
“Bonus” first-year depreciation. Thanks to the new law, businesses will continue to have the option of deducting 50% of the cost of qualifying property (e.g., most machinery and equipment) in the year the property is placed in service. The 50% “bonus” depreciation percentage is available for 2015, 2016, and 2017. The percentage drops to 40% in 2018 and to 30% in 2019.
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What is Cloud Accounting?
Mar 15, 2016
Whether you know it or not, you use the cloud on a daily basis. If you log onto Facebook, pay your bills online, or surf the internet, you are using the cloud. Cloud computing, or the cloud, is the general term for anything involved in delivering hosted services over the Internet rather than on your local desktop. The cloud utilizes multiple remote servers networked to permit the sharing of data-processing tasks, centralized data storage, and online access to computer services or resources. The cloud permits higher volumes of information to be shared than the traditional direct connection to a server.
What is cloud accounting?
Cloud accounting serves the same function as the accounting software installed on your computer. However, the program runs from outside servers and access to the program involves using your web browser, over the Internet.
Cloud accounting employs the cloud to process your accounting transactions. Traditionally, businesses and organizations purchased accounting software, installed it on internal computers or networks, and processed transactions with the program. WVC RubixCloud provides an application (general ledger software) which is hosted on someone else’s system, allowing you to complete your processing by accessing the program online. All of your data is securely stored and processed on a remote server in the cloud.
How secure is my data?
Often times, the cloud is more secure than being on your own network. In fact, cloud computing offers a level of physical and electronic security that an on-site server or a locked file cabinet cannot begin to approach. It’s important to understand that data hosted in the cloud is managed by a data center. All data centers are different and independent. You need to make sure the data center you choose can manage the data you are processing. There is a whole checklist of security measures you should be aware of, and I will address those in a future post.
Cloud computing offers more reliable protection from internal data loss than other communication methods because it gives you centralized control over your data. It’s much easier to establish and enforce policies for a cloud-based system than for the individual silos of email accounts, physical media, applications and flash drives that handle on-site data storage.
Is cloud accounting expensive?
Computing in the cloud has proven to be significantly inexpensive compared to traditional methods. There are fewer overall costs associated with cloud computing. There is no software to install and maintain. The IT infrastructure required is simply a connection to the internet, whereas traditional methods include a series of networks, applications, and workarounds. Cloud computing provides you the flexibility to utilize only the services you want, when you want them, and at a fixed monthly fee.
So, now that you know more about the cloud and cloud accounting, why should you make the transition? Click here to for 10 reasons you will love WVC RubixCloud.
By: Jennifer Kinzel, Director of WVC RubixCloud
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