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IRS Tips for End of Year Giving

by Jeff Dailey
written by Jeff Dailey

Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years. Some of these changes include the following: IRS Tips for End of Year Giving
Special Tax-Free Charitable Distributions for Certain IRA Owners
This provision, currently scheduled to expire at the end of 2013, offers older owners of individual retirement arrangements (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity. This option, first available in 2006, can be used for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.
To qualify, the funds must be transferred directly by the IRA trustee to the eligible charity. Distributed amounts may be excluded from the IRA owner’s income — resulting in lower taxable income for the IRA owner. However, if the IRA owner excludes the distribution from income, no deduction, such as a charitable contribution deduction on Schedule A, may be taken for the distributed amount.
Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.
Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats amounts distributed to charities as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions. See Publication 590, Individual Retirement Arrangements (IRAs), for more information on qualified charitable distributions.
Rules for Charitable Contributions of Clothing and Household Items
To be tax-deductible, clothing and household items donated to charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.
Donors must get a written acknowledgement from the charity for all gifts worth $250 or more that includes, among other things, a description of the items contributed. Household items include furniture, furnishings, electronics, appliances and linens.
Guidelines for Monetary Donations
To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.
Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.
Reminders
To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders:

  • Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2013 count for 2013. This is true even if the credit card bill isn’t paid until 2014. Also, checks count for 2013 as long as they are mailed in 2013.
  • Check that the organization is eligible. Only donations to eligible organizations are tax-deductible. Exempt Organization Select Check, a searchable online database available on IRS.gov, lists most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in the database.
  • For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2013 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
  • For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
  • The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
  • If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.
  • And, as always it’s important to keep good records and receipts.

IRS.gov has Additional information on charitable giving.

IRS Tips for End of Year Giving

IRS Tips for End of Year Giving IRS Tips for End of Year Giving IRS Tips for End of Year Giving IRS Tips for End of Year Giving

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Tips for Older Donors Who Want to Give
Money Tips

Tips for Older Donors Who Want to Give

by Jeff Dailey
written by Jeff Dailey

All too frequently the elderly are the victims of charitable fraud. If you’re a relative or caretaker of an older American, please take a moment to review the following tips. These easy-to-follow precautions can help ensure seniors contribute only to legitimate and efficient charities.Tips for Older Donors Who Want to Give

  • Don’t succumb to pressure tactics.
    Well-run charities don’t use pressure tactics to garner support for their mission. They don’t have to. Their good work and financial health speaks for itself.
  • Verify their claims that you’ve contributed in the past.
    If a caller or an appeal letter indicates that you’ve given in the past, but it doesn’t sound familiar to you, be sure to check it out for yourself. Look up previous entries in your checkbook or past credit card bills and confirm for yourself that you’ve supported this particular charity before.
  • Do not feel compelled to give because you received a gift.
    Just because you received some mailing labels, cards or an umbrella, that doesn’t mean you’re required to reciprocate with a donation. Be especially wary of sweepstakes that require a contribution to enter. Again, a reputable charity doesn’t need to employ such inefficient and deceptive fundraising tactics.
  • Be careful of imposters.
    Scam artists often use sound-alike names to trick you into thinking they represent a legitimate charity.
  • Hang up the phone.
    Ask the fundraiser to send you written information about the charity they represent, hang up the phone and do some research on your own. Once you feel comfortable with the charity, send the organization a check directly in the mail, thus ensuring 100% of your gift goes to the charity and not the for-profit fundraiser.
  • Make sure that your donation is tax-deductible.
    Before giving a donation to any organization, make sure it is a 501(c)(3) charity. That means the group has filed paperwork with the Internal Revenue Service (IRS), registering it as a U.S. nonprofit and enabling its contributors to take a tax-deduction for their gifts. A quick way to confirm the organization’s status is to check with us. All the charities evaluated by Charity Navigator are 501 (c) (3) entities.
  • Research the charity before you give.
    Take a look at the organization’s finances. Make sure it is able to direct at least 75% of its budget on the programs and services it exists to provide. With a million nonprofits in America, you should have no problem finding one that matches your philanthropic interests and will put your donation to good use.
  • Send your donation directly to the charity.
    Never divulge your personal or credit card information to those initiating contact. Once you’ve done your research, send your contribution directly to the charity you wish to support. Don’t send cash as it can be lost or stolen. Also, you’ll want to have paid by check or credit card so you have a receipt of your donation when it comes time to take the tax-deduction.
  • Tell the charity not to share your personal information.
    When you send a charity a small donation- say $10 or $25- there is a high probability that the organization will then sell or trade your contact information with other charities. The next thing you know, your mailbox is overflowing with solicitations. Often older Americans get caught up in this vicious cycle because they respond with a small donation to each new appeal full of heartbreaking photos. To prevent this from happening, tell the charity upfront that you do not want it to share your personal information with any other entity. At Charity Navigator each of our charity evaluations includes an assessment of the charity’s willingness to enable you to opt-out of such practices.

From www.charitynavigator.org

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Later is Too Late
Money Tips

Tips for Giving Money in Times of Crisis

by Jeff Dailey
written by Jeff Dailey

Tips for Giving Money in Times of Crisis

  • Give To An Established Charity Tips for Giving Money in Times of Crisis
    FinancesDon’t let an unscrupulous charity take advantage of your goodwill. Find a charity with a proven track record of success with dealing with the type of disaster and in the region in which the disaster occurred. Avoid fly-by-night charities created specifically to deal with the new crisis. Even well-meaning new organizations will not have the infrastructure and knowledge of the region to efficiently maximize your gift. If you do feel compelled to give to a new charity, be sure to get proof that the group is in fact a registered public charity with 501 (c) (3) status. Tips for Giving Money in Times of Crisis
  • Designate Your Investment
    Worried that your donation will go towards the charity’s general operating fund or saved for a future crisis? This is a very understandable concern. Many charities do encourage donors not to designate their gifts so that the charity can decide how best to utilize the money, but depending on your confidence in the charity’s ability to make that determination, you may choose to tell the charity exactly how to use your investment. By designating your gift, you’ll ensure that your donation will be used as you intended. Most charities with online giving portals offer a check box feature so that you can tell the organization how to spend your contribution. If you are mailing in a check, then write a note in the memo section of the check specifying that you want your gift spent entirely on the current crisis.
  • Avoid Telemarketers
    Be wary of fundraisers who pressure you to make a contribution over the phone. Never divulge your credit card information to someone soliciting you via the phone. Instead, ask the fundraiser to send you written information about the charity they represent and do some research on your own. Once you feel comfortable with the charity, send the organization a check directly in the mail, or give through their website, thus ensuring 100% of your gift goes to the charity and not the for-profit fundraiser.
  • Do Not Send Supplies
    Knowing that people are desperately in need of basic supplies like food, water and shelter, it is hard not to want to pack up and send a box of supplies. But this type of philanthropy is simply not practical or efficient. Even if mail could get to an impacted region, no one is set up to receive these goods, much less organize and distribute them to the victims. Furthermore, charities are often able to partner with companies to acquire large amounts of in-kind donations such as bottled water and new clothing. Instead of boxing up and sending your old clothing, have a garage sale and turn your used goods into cash and donate that to a worthy charity.
  • Be Careful Of Email Solicitations
    • Be Leery Of People That Contact You Online Claiming To Be A Victim – Unless you personally know someone in the impacted area, anyone alleging to be in this position is most likely part of a scam. Obviously, people affected by a large scale disaster like a earthquake, hurricane or tsunami are in no position to contact you directly for assistance.
    • Delete Unsolicited Emails With Attachments – Never respond to unsolicited emails. Do not open any attachments to these emails even if they claim to contain pictures from the disaster. These attachments are probably viruses.
  • Seek Out The Charity’s Authorized Website
    Criminals are likely to set up bogus sites to steal the identity and money of generous and unsuspecting individuals. We saw this after Hurricane Katrina when the FBI reported that 4,000 sites were created to do just that. So, if you plan to give online, be sure to find the charity’s legitimate site. You can safely give on Charity Navigator’s site via our partnership with Network for Good. Alternatively, we link to each charity’s authorized site so you can give there if you prefer.
  • Think Before You Text
    So long as you do your homework – meaning that you’ve vetted the charity and made sure that you are using the proper texting instructions- then texting can be a great way to give. Remember there may be additional costs to you to make such a gift. And it can take as much as 90 days for the charity to receive the funds.
  • Consider The Nature Of The Charity’s Work
    Not every charity responds to a disaster in the same way. Some provide medical assistance, some shelter, some food and water. Others will be more focused on either short term or long term rebuilding efforts. And some will just fundraise for other nonprofits. Think about what it is you want your philanthropic investment to accomplish and then take the time to find the charities doing that work. At Charity Navigator we link to each charity’s website so that you can quickly learn more about their plans to help.
  • Be Inspired By Social Media, But Still Do Your Homework
    Social networking tools like Twitter, Facebook, YouTube and blogs can deliver heart-wrenching images and information about a disaster to our computers and phones. These often include pleas to donate. While these applications can be a powerful tool to inspire your desire to help, you should not blindly give via these vehicles. You must take the time to investigate the groups behind such pleas for help to ensure that it comes from a legitimate nonprofit.
  • Do Not Expect Immediate Results, But Do Keep Tabs On What Your Donation Accomplishes
    It takes time for charities to mobilize, to assess the problems that need to be addressed and to develop effective solutions. Donors need to be patient so charities will not feel pressured to plunge in and offer ineffective aid, simply to placate impatient donors. That doesn’t mean donors shouldn’t hold the charities accountable for delivering on their promises! Be sure to follow up with the charity in a few months to find out (a) how your donation was put to use and (b) if the organization needs additional support to complete the recovery effort.
    By www.charitynavigator.org
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Money Tips

Intergenerational Generosity from the Boomers!

by Kimberly Johnson
written by Kimberly Johnson

Intergenerational generosity: Here come the boomers!

During the holidays and especially at Thanksgiving, gratitude is the pervasive theme: gratitude for sustenance, for bounty, for freedom. Gratitude for life itself. Intergenerational generosity from the boomers!
Gratitude can beget generosity. Gratitude is often enhanced by the passage of time and the aging process. In fact, increasing numbers of baby boomers who have had successful careerenid
s, whose children are grown, and who may have “powered down,” will likely prove to be the most generous generation in history.
So says Merrill Lynch in a recent research report on giving by retirees. As a group (over 2000 boomers were surveyed), the statistics are impressive. The projection is that “over the next two decades there will be a surge in giving by retirees.” The report calls it the “Longevity Bonus” which includes both outright giving and volunteerism. They quantify the impact as exceeding $8 trillion from 2016-2035.
2014 was a very good year for philanthropy with more than $350 billion in charitable giving according to Giving USA . Ninety percent was outright giving by individuals and their family foundations during their lifetimes, and through legacy giving. Notably, giving by bequest was up 15.5 percent. Giving through donor advised funds, an increasingly attractive option, is not counted as individual giving.
It is estimated that over the next 30 or so years estate distributions will exceed $40 trillion.
Some boomers are heirs to their living parents’ estates and many boomers themselves will become centenarians with an extended retirement and further opportunities to grow their wealth and contribute. Boomer outright and bequest giving to non-profit organizations is trending dramatically upward.

Volunteerism is also on the rise for retirees. They are giving not only treasure but time and talent as well. Some in their “third age” transfer business ownership to heirs, not only for tax reasons but also to focus on their own philanthropy. Some seek encore careers to generate more dollars to give. Some do pro-bono consulting and mentoring to share their professional expertise in ways that substantially assist non-profits.

According to the Merrill Lynch Survey:
Over 80% of retirees over 65 responded that they give money or goods to non-profits and 65 percent believe that “retirement is the best time in life to give back .”
Retirees give 42% of all money given to charity and 45 percent of the volunteer hours while comprising less than a third of the US adult population
Sixty-nine percent of retirees believe that “being generous is an important source of happiness in retirement” and retirees who are charitable indicate they have “a strong sense of purpose” and “high self-esteem.”
Retirees redefine success from career advancement and wealth to generosity; their top motivation is gratitude.
What about giving to family? Philanthropic giving relies on a sense of personal security and most often, giving first to family. Increasing life-spans elongate the time until inheritance and many boomers, some 77 percent, are preferring to give to family members “with a warm hand, not a cold one.”
But there’s a caveat: the word “affluenza” has been used to describe the affliction of the children of the wealthy. Today we might call it entitlement. How do we teach values?
Character? How do we model the concept of “enough?”
Financial and legal advisors are likely to point out that any individual can currently give up to $14,000 a year (the number may increase in future years) to another individual with no gift tax consequences. That’s $28K per couple to each child, their spouse, each grandchild, nieces, nephew, etc. And you can do it (or not do it) every year. That’s a pretty simple estate reduction plan that can avoid some taxation for larger estates.
But how would such gifts be used? A down payment? College tuition? A new car? A gambling junket? To pay off debts from a shopping spree? Does it matter to you?
Each family has its own answer to giving now or giving later, whether tax-wise or not.
Traditional estate planning focuses on passing the maximum amount on to heirs and avoiding taxation. Inter-generational philanthropy begins with passing on fundamental values, including the concept of charitable intent. It involves the desire to teach by example, giving the next generation the chance to discover the joy of giving, and guiding them to learn through their own philanthropic experiences.
Thanksgiving is a good time to have important family conversations about gratitude and giving.
Whether you are an elder, a boomer, the progeny of a boomer or a grand or great-grandchild, it is time to be thankful, to show your gratitude, and to give generously.
Enid Ablowitz, CFRE, CSPG, is a veteran advancement professional, author and consultant who is dedicated to educating and guiding donors and non-profit organizations on the art and science of strategic philanthropy.

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