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Tag Archive | "federal tax return"

Know these facts before deducting a charitable donation


 

If taxpayers gave money or goods to a charity in 2016, they may be able to claim a deduction on their federal tax return. Taxpayers can use the Interactive Tax Assistant tool, Can I Deduct my Charitable Contributions?, to help determine if their charitable contributions are deductible.

Here are some important facts about charitable donations:

Qualified Charities. Taxpayers must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible. To check the status of a charity, use the IRS Select Check tool.

Itemize Deductions. To deduct charitable contributions, taxpayers must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with a federal tax return.

Benefit in Return. If taxpayers get something in return for their donation, they may have to reduce their deduction. Taxpayers can only deduct the amount that exceeds the fair market value of the benefit received. Examples of benefits include merchandise, meals, tickets to events or other goods and services.

Type of Donation. If taxpayers give property instead of cash, their deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price they would get if the property sold on the open market. If they donate used clothing and household items, those items generally must be in good condition or better. Special rules apply to cars, boats and other types of property donations.

Noncash Charitable Contributions. File Form 8283, Noncash Charitable Contributions, for all noncash gifts totaling more than $500 for the year. Complete section-A for noncash property contributions worth $5,000 or less. Complete section-B for noncash property contributions more than $5,000 and include a qualified appraisal to the return. Taxpayers may be able to prepare and e-file their tax return for free using IRS Free File. The type of records they must keep depends on the amount and type of their donation. To learn more about what records to keep, see Publication 526, Charitable Contributions.

Donations of $250 or More. If taxpayers donated cash or goods of $250 or more, they must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether they received any goods or services in exchange for the gift.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at https://www.irs.gov/individuals/electronic-filing-pin-request.

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Who will prepare your tax return? 


 

The Internal Revenue Service is reminding taxpayers to start thinking about who will prepare their 2016 federal tax return. The IRS began processing tax returns on Monday, January 23.

In 2016, more than 131 million individual and family tax returns were e-filed, the most accurate, safest and easiest way to file. The rest of the returns received by the IRS, numbering over 19 million, were either prepared on a computer and printed or prepared by hand then mailed.

The IRS stresses that no matter who prepares it, by signing the return, the taxpayer becomes legally responsible for the accuracy of all information included.

Free Tax Preparation 

Each year, millions of tax returns are prepared for free by taxpayers using IRS Free File or by volunteers at community organization sites nationwide.

IRS Free File lets taxpayers who earned less than $64,000 prepare and e-file a return for free. Go to IRS.gov and click on the ‘Filing’ tab for options on using commercial tax software. Those who earned more than $64,000 are still eligible for Free File Fillable Forms, the electronic version of IRS paper forms. This more basic Free File option is best for people who are comfortable preparing their own tax returns.

IRS trained and certified volunteers at thousands of Volunteer Income Tax Assistance and Tax Counseling for the Elderly (VITA and TCE) sites nationwide offer free tax preparation and e-filing.

VITA offers free tax return preparation to taxpayers who earn $54,000 or less. The TCE program is mainly for people age 60 or older and focuses on tax issues unique to seniors. AARP participates in the TCE program and helps taxpayers with low to moderate incomes.

To find the closest VITA site, visit IRS.gov and search the word “VITA.” Or download the IRS2Go app on a smart phone. Site information is also available by calling the IRS at 800-906-9887.

To locate the nearest AARP Tax-Aide site, visit aarp.org, or call 888-227-7669. There are also VITA and TCE sites that provide bilingual help for taxpayers who have limited English skills.

Many taxpayers pay for tax return preparation. By law, all paid tax preparers must have a Preparer Tax Identification Number, or PTIN. Paid preparers must sign the return and include their PTIN. The IRS offers tips to help taxpayers choose a tax return preparer wisely. The Choosing a Tax Professional page has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers in your locality by type of credential or qualification.

The IRS urges taxpayers to avoid fly-by-night preparers who may not be available after this year’s April 18 due date or base fees on a percentage of the refund. The IRS also reminds taxpayers that a new law requires all refunds on returns that claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) be held until Feb. 15. This change helps the IRS detect and prevent fraud.

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