Charitable Tax Deductions That May Surprise You

There are many people who make charitable donations every year and document them so that they can be claimed as tax deductions. However, many of us fail to take all of our charitable donations into consideration when going through our tax deductions, with some failing to even realize that some of the donations they have made are tax deductible.

There are in fact many charitable tax deductions that may apply to you without you even realizing it, and some people are very surprised to learn about the various donations that are actually tax deductible. Some of these donations are ones that you might make off the cuff without even thinking about it – such as sponsoring someone that you know for an event – but it is important to make a note of even these small donations, as it all adds up and could make quite a difference to the overall amount you can claim on charitable donations.

Some of the surprising charitable donations that you may never have thought of logging down as being tax deductible include:

  • Sponsoring a person you know: A huge number of us sponsor people that we know, often many times a year, for things such as fun runs and sports events to raise money for a good cause. Whilst you may not be sponsoring a huge amount, every little helps, so you should make sure you have a record of it in the form of a statement of you paid by card or cheque or a receipt if you paid by cash
  • Getting to sites where you volunteer: There are many people that like to volunteer to help out at good causes, which often involves going to one of the charity’s sites. Whether you take public transport or drive yourself to the site, the amount that you spend in terms of fare or mileage can be claimed. This is something that many people overlook, but if you volunteer and travel to the site regularly it can amount to a tidy sum. Bear in mind that you can only claim if you are not being reimbursed for your travel
  • Cooking for charity: There are some people that devote their time to cooking for charity, whether it is to feed people such as the homeless or to prepare something as a prize or a competition. If this is something that you do, make sure you keep a record of the cost of the ingredients as this is something that you should be able to claim back
  • Donations of items you have purchased: Some people give to charity not by donating cash but through items that they have purchased. You can claim back for the cost of the purchased items – just keep the receipt and a record of which charity they have been donated to
  • Donating used items: Many people would never think that they could claim against used items that are donated to charity, but you can. You need to look at the cost or fair market value (whichever is the lowest) to work out the value of the donation you have made

These are just some of the charitable donations that many people overlook when working out their tax deductions. It is important to think not only about the more obvious donations that you make, but also the everyday donations that you might make, which can easily be overlooked.

Esther is a blogger and journalist who writes about loans, mortgages and other financial issues. She also maintains a blog for paydayloansuk.org.uk.

An End To Charity Tax Breaks?

For a long time those who have contributed to charity have been able to see a benefit in terms of a lower tax bill. For British taxpayers this era may be coming to an end with Chancellor George Osborne seeking to close what he sees as a loophole.

With the current government having come to power partially on a platform of “the big society”,  a move to curb philanthropic donations seems slightly surprising. The idea of the “the big society”, as far as anyone was able to divine, was to replace aspects of the public sector with work by the charity and voluntary sectors.

It is not proposed to end tax relief for charitable donations altogether, but rather for there to be a cap put in place. There has been criticism of this proposal however, with many pointing out that wealthy individuals are donating much more to charity than they are saving on their tax bills.

Dodgers

There can be little doubt that tax chiefs see a problem in the way that things stand at the moment. Through canny accounting the amount income tax paid some of the wealthier Britons is thought to be just around ten percent.

While low tax returns are obviously a concern for the government, it is far from clear that this is a problem either for society or the economy at large. For instance large amounts of money are given to fund medical research and to help vulnerable groups. At the same time the argument against the 50p tax rate was that it is a force stopping the job creators from creating jobs, and surely that would also apply to any measure designed to increase the tax take from the wealthy.

Tax Planning

Minimising the amount that you pay in tax, within the law, is perfectly legitimate – by definition.  Planning your tax affairs in a way that makes sense for you does not make you a ‘cheat’ or a ‘tax-dodger’. Indeed if you cannot even be bothered to take the allowances you are entitled to with regards to your own money, should you be trusted with other peoples, for instance in a work situation.

It is perhaps true that the tax system is too complicated. It is very hard for the individual to avoid being ripped off by the taxman. In order to get the best deal it is often necessary to involve accountants and other professionals who are knowledgeable in the field.

Whether Osborne’s reforms go through as planned or not the British tax system, like all others, will continue to have its idiosyncrasies, and there will continue to be ways to avoid being stung for the full whack when it comes to tax time. Hopefully also charitable donations (which have fallen in recent years) will continue to be made.

Pamela Chimbonda wrote this content on the behalf of Adam & Co. who specializes in private wealth management.

Early Bird Gets the Worm: Planning for Retirement in Your Twenties

Thinking about the time when you give up work can never start too early. When you’ve just hit twenty and you’ve been given your first job, thinking about the end of your career is the furthest thing from your mind. Contemplating the end, however, will allow you to take a proactive role in planning for retirement. And maybe allow you to be a grooving granny with cash to burn.

How to go about planning for your retirement

There are certain points that you will need to consider when implementing a plan to cover yourself later in life.

Firstly, before you can even begin to think about embarking on any form of retirement savings plan, you need to have a sufficient emergency savings funds. Do you have three-six months worth of salaries saved up in a secure savings account? If not then you need to take care of that. It is the preamble before planning for retirement. It isn’t a strength of the young to look to the future, but setting up a totally secure reserve that you can dip into when life take’s an unexpected turn for the worse will ultimately help you weather those times. Save you some Botox?

For those that have their unassailable savings taken care of, you can now start ploughing your extra money into a form of retirement savings. Unless you’re one of the fortunate few that fall into the high-income tax bracket, you are advised to set up a ROTH IRA account. In this case, you won’t exceed the income eligibility threshold and you will be able to put away up to 3000 pounds a year. This could significantly fatten your retirement funds. Thailand here you come!

Once you’ve set up your ROTH IRA account there are a few other retirement planning tips to be had. Firstly, keep in mind that investing in stocks is a good idea if you’re thinking about long-term growth. Investing money with the hope that you’ll achieve high returns over long periods always comes with a bit of risk but deserves to be looked into.

Never rely too heavily on your bond, even in retirement. Inflation can easily wear away the purchasing power of your bond’s interest payment.

Lastly, if you invest your time in the right company, you can benefit from pension schemes that supplement your savings. The office you choose could potentially be the place that increases your nest-egg and help you to plan ahead. If you start implementing some of these retirement planning guides now, you’ll determine your own fate in more ways than one.

In the working world, many business people tend to look ahead in terms of their careers, their office space, and their progression. Planning for your retirement is a means to an end, and a good one at that. You could be playing bingo and soaking up the sun in the Caribbean if you start saving now!

 

Bella Gray is busy planning her retirement at her executive suites New York. She likes to share the tips she picks up while looking for new investment opportunities. Impressed by her return on investment from her serviced offices Victoria, Bella now recommends serviced offices to all of her business partners and friends.

Discharging Tax Debt Through Bankruptcy

Filing for bankruptcy can be an effective way to get out of debt and get started rebuilding your financial life. While bankruptcy can provide quicker relief than other options such as debt settlement or credit counseling, some debts are ineligible for discharge. When dealing with tax debt, it can be difficult to get a discharge for it through bankruptcy. While it is possible, you’ll have to make sure that you meet certain standards. Otherwise, your tax debts may remain even after you file for bankruptcy.

Tax debts are subject to specific rules that must be met before they can be discharged in any kind of bankruptcy. The tax debt in question must be at least 36 months old in order to be eligible. When you need to discharge a tax debt, the return associated with that debt must have been filed at least 24 months ago as well. In addition to filing the return more than 24 months ago, you also have to make sure that the tax assessment is at least eight months old. The tax return that you file also has to be legitimate and cannot be fraudulent. You also cannot simply file for bankruptcy so that you can get out of paying taxes. This is considered tax evasion and is against the law.

If you want to qualify for bankruptcy discharge with your tax debt, you also have to prove that you have filed your last previous four tax returns with the Internal Revenue Service. Without having proof of filing those returns, you will not be eligible to have the debt discharged through the bankruptcy process.

While it is possible to get your tax debt discharged in bankruptcy, it is not very likely. In order to get part of your tax debt discharged, you have to prove that it is at least three years old. In most cases, the Internal Revenue Service will start contacting you almost immediately after your tax debt is not paid. The chances of you being able to hold out for more than three years without having anything done by the IRS are not good. The Internal Revenue Service has many ways that they can try to get you to pay your tax debt. For example, the IRS can file a tax lien on your property and make it difficult to sell any of your property without paying back the debt. In some cases, the IRS also has the right to seize your property such as your house, your vehicle, jewelry, securities and money from your bank account. If you do not pay the debt in the appropriate amount of time, the IRS will start trying to collect this money from you.

If you are having trouble repaying your tax debt, you may want to explore some other options besides trying to wait out the three year period for filing bankruptcy. For example, you could try to set up an installment agreement with the IRS or use an offer in compromise to settle your tax debt for less than you owe. The IRS will evaluate your proposal and decide if it is worth accepting.

Tips For Small Business Owners

For many sole traders or small businesses it can be difficult to find the time to maintain all paperwork on a regular basis, meaning a large amount of admin is left until it is absolutely necessary to sort out.

If this sounds like you, then you will need to make some changes to the way you work because the Inland Revenue  is set to investigate two million small businesses – slapping many with big fines if records have not been kept in order. Here are 5 tips to help your business in 2012…

Receipt
Receipt (Photo credit: BreakfastPirate)

1) Get organised, get in a routine and get sorted

Under the HM Revenue and Customs initiative ‘Business Records Checks’, small businesses and sole traders will be subject to inspection to ensure all paperwork and bookkeeping is up-to-date and correct. If they find that your business isn’t hitting their standards, you’ll be fined £3,000. And as the HMRC have been given a target of £600 million to hit over the next four years, you can be sure they won’t be taking a lenient approach when it comes to handing out fines.

Getting organised seems like an obvious first step, but if you’ve set your admin duties to one side for quite some time, you’ll have your work cut out! Admin is part of your business, so set some time aside either at the start or end of the week (or whenever your quiet period is) and focus on your paperwork and bookkeeping.

Consistency and routine are key to ensuring you stay on top of this task.

2) Keep all receipts

It is essential you keep all receipts so that you can back up business expenses. You could get 12 envelopes and write the name of each month on them and store your receipts according to when you purchased goods / paid bills. Alternatively, you could separate receipts according to source, for example ‘rent’, ‘tools and supplies’ ‘stationery’ ‘miscellaneous’.

This also applies to documentation for purchases you want to claim the VAT back on.

3) Bank and building society documentation

It’s easy to see a letter or statement from a bank or building society and think ‘I know what that is, I’ll open it later’ and before you know it, you have a stack of unopened letters to sort through. This is a habit you need to break – open the letter, check payment transactions are correct and file it away. It only takes a few minutes at the most and means you’ll save yourself a great deal of time and effort later on.

4) File your tax return on time

If you’ve kept paperwork up-to-date as outlined in the points above, you’ll find that filing your tax return will be much more straightforward to complete on time – helping you to avoid fines for being late.

5) Don’t throw anything away!

We’re not suggesting that you become a compulsive hoarder and never throw anything away; we simply mean that at the end of every tax year, you box away important financial documents like receipts, invoices and bank statements, and keep them safe in case you need them in the future. You should keep documentation of this sort for at least six years.

Gambling and taxes – what should you report?

Gambling is something that many people enjoy doing either on a regular basis or now and again. Of course, gambling is a much more enjoyable pastime when you are winning rather than losing! However, if you are one of the lucky ones on a winning streak you need to bear in mind that you’re probably going to have to give a slice of your good luck to the IRS, as it will be classed as taxable income.

In many cases, if you have been lucky enough to win a big jackpot the payer will actually deduct taxes from your winning upfront and the information will be issues to you via the W-2G form. The amount of money that you have won, and the type of gambling that you won it on, will determine whether the payer gets involved in taking your details and withholding part of your winnings for the taxman.

When you have bagged larger sums of money by way of winnings the payer will need to take your social security number to let the IRS know that you have come into some additional ‘income’. In some cases they will take the 25 percent tax from your winnings before you get your money. If you do not provide your social security details the payer could withhold as large an amount as 28 % of the winnings, so it is advisable to cooperate and furnish the casino with the necessary information.

Of course, you may only have won a small amount with your gambling, which will not warrant the payer to take your details and inform the IRS. However, in order to ensure that you are paying your taxes by the book you will still need to declare these winnings. Both big jackpots and smaller winnings can be reported under the ‘other income’ section of Form 1040. You can also supply details here of any taxes that were paid upfront on your winnings through deductions made by the payer, which will be detailed on the W-2G form.

The good news is that whilst you have to pay tax on your gambling winnings you are also able to deduct tax on your losses. So, unless you struck really lucky and scored a big jackpot with your very first bet you can recoup some or even all of the money that you pay on taxes on your winnings based on how much you lost on your gambling.

Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to mortgage loans.