DECEMBER … THE MONTH FOR GIVING

Do So Charitably, and With Caution

This is the season for giving. Generally we all feel more willing to open our purses for good causes. And there are plenty of opportunities to do so … both solicited and unsolicited by you. So in this article we’ll cover two major considerations before you write that check or offer your credit card:

• Avoid fraudsters seeking to take advantage of your generosity, and
• Determine if your donation will be to a tax-exempt charity which will trigger a tax deduction for you.

Research Before Giving

Particularly at this time of year, you are likely to be solicited for contributions from charities and professional fundraisers working on behalf of charities. Your contact may be by phone, face-to-face, email or the internet … including social networking sites you may frequent.

Scammers use the same solicitation channels, so a few words of caution if the charity on the surface sounds appealing. Run, do not walk, when a solicitor:

• Uses a name that closely resembles that of a better-known, reputable organization.
• Thanks you for a pledge you don’t remember making.
• Refuses to provide detailed information about its identity, mission, costs, and how the donation will be used.
• Won’t provide proof that a contribution is tax deductible.
• Uses high-pressure tactics like trying to get you to donate immediately, without giving you time to think about it and do your research.
• Asks for donations in cash or asks you to wire money.
• Offers to send a courier or overnight delivery service to collect the donation immediately.
• Guarantees sweepstakes winnings in exchange for a contribution. By law, you never have to give a donation to be eligible to win a sweepstakes.

For more information, visit ftc.gov/charityfraud.

Ensuring Your Contribution is to a Tax-Exempt Charity

Not all charities are equal … when it comes to tax-deductible contributions. You may be able to deduct donations to a tax-exempt organization on your tax return so it’s critical that you determine whether your targeted charity qualifies as tax-exempt.

Before we help you determine how to identify a charities tax-exempt status, it’s worth a minute to revisit an important change in both the standard deduction and itemized deductions as enacted in the new tax law.

The standard deduction doubled from $6,350 for single filers to $12,000; married and joint filers increased from $12,700 to $24,000. This, coupled with the changes to itemized deductions, is likely to lead to more taxpayers taking a simplified approach to filing, i.e. electing the standard deduction.

Note: Traditionally, Virginia tax law has conformed to federal. However, that is not the case today as the state standard deduction has not been increased to track with the revised federal rules. There are proposals to revise the Commonwealth’s law, so be sure to check with your tax advisor to determine your best tax strategy.

OK,  let’s assume you and your tax advisor agree to consider itemizing your deductions and contribute to one or more favorite charities. To further the likelihood you will enjoy tax savings from your effort to do good, you’ll want to be sure your chosen charity is designated as tax-exempt by the Internal Revenue Service.

Happily, the IRS has a resource that will help … the Tax Exempt Organization Search tool which allows you to search for charities and identify their tax status and filings. If you choose to use the tool, here are the things to look out for:

• Confirm an organization is tax exempt and eligible to receive tax-deductible charitable contributions.
• Has an organization had its tax-exempt status revoked.
• The list does not include certain organizations that may be eligible to receive tax-deductible donations, including churches, organizations in a group ruling, and governmental entities.
• Organizations are listed under the legal name or a “doing business as” name on file with the IRS.

Questions about should you take the standard or itemized deduction route and whether a charity qualifies as tax-exempt … give us a call to discuss. We’ll respond promptly.