Don’t Let The Gift Of Giving Become An IRS Nightmare
Is there a box of junk taking up space in your home, clothes that have long ago been outgrown, trinkets that no longer match your décor to pass along to someone whom will find a fresh use for them? Do you help out family members and close friends when they are low on cash? Or enjoy giving back, by donating to your favorite charity?
Giving is a gift from the heart, a no-strings attached gesture to better the world around you. You give and then walk away, your heart filled with the knowledge that you are doing your part. But, like most things, there are strings attached to the act of giving. Make sure you don’t get tangled up in these strings by staying compliant with the IRS when making donations.
Staying compliant with the IRS is as easy as the act of giving itself. First, ensure that you are giving to a qualified charitable organization. Organizations can tell you if they are qualified. No matter the value of your gift, obtain a receipt of some form. This receipt can be a traditional printed receipt, credit card statement, bank statement, or a cancelled check. A gift of $250 or more must be verified with a written acknowledgement from the organization. The difference between a receipt and a written acknowledgement is simple. A receipt is when money has changed hands, proof that you have paid. An acknowledgement is the organization admitting they have ownership of your gift. This is accepted in many forms and commonly mistaken as a thank you letter from the organization you have donated to. Qualified organizations know the requirements of a written acknowledgement.
When giving a gift to a family member, friend, or individual it is not considered income to the recipient or deductible for the giver. You may give up to $14,000 per year, $28,000 for married couples, without having to file a gift tax return. If you desire to pay for medical expenses or tuition costs that exceed this amount, you may pay directly and not be held to the $14,000 limitations. For non-cash donations, you use the amount you paid or the thrift shop value as the tax deductible amount, whichever is lower. Gifts valued over $500 must be documented on a separate form with the item description and the name and address of the organization the gift was given to.
With capital assets and publicly traded stocks the deductible amount is the current FMV, even if it is higher than the cost. For gifts valued over $5,000 or vehicles there are special guidelines that apply. Don’t get tied up. Follow these simple guidelines to stay complaint with the IRS and truly enjoy the gift of giving, no-strings attached!Leave a reply →