Tax Time Guide: Good Records Key to Claiming Gifts to Charity

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Charitable Contributions: English | Spanish | ASL
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WASHINGTON ― The Internal Revenue Service today reminded taxpayers planning to claim charitable donations to make sure they have the records they need before filing their 2015 tax returns.

This is the fifth in a series of 10 IRS tips called the Tax Time Guide. These tips are designed to help taxpayers navigate common tax issues as this year’s April 18 deadline approaches.

For any taxpayer, keeping good records is key to qualifying for the full charitable contribution deduction allowed by law. In particular, this includes insuring that they have received required statements for two contribution categories—each gift of at least $250 and donations of vehicles.

First, to claim a charitable contribution deduction, donors must get a written acknowledgement from the charity for all contributions of $250 or more. This includes gifts of both cash and property. For donations of property, the acknowledgement must include, among other things, a description of the items contributed.

In addition, the law requires that taxpayers have all acknowledgements in hand before filing their tax return. These acknowledgements are not filed with the return but must be retained by the taxpayer along with other tax records.

Second, special reporting requirements generally apply to vehicle donations, and taxpayers wishing to claim these donations must attach any required documents to their tax return. 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.

The IRS also reminded taxpayers to be sure any charity they are giving to is a qualified organization. Only donations to eligible organizations are tax-deductible. Select Check, a searchable online tool 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 even if they are not listed in the tool’s database.

Only taxpayers who itemize their deductions on Form 1040 Schedule A can claim gifts to charity. Thus, taxpayers who choose the standard deduction cannot deduct their charitable contributions. This includes 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 2015 Form 1040, Schedule A to determine whether itemizing is better than claiming the standard deduction.

Besides Schedule A, taxpayers who give property to charity usually must attach a special form for reporting these noncash contributions. If the amount of the deduction for all noncash contributions is over $500, a properly-completed Form 8283 is required.

The IRS provided these additional reminders about the special rules that apply to charitable contributions of used clothing and household items, monetary donations and year-end gifts.

Rules for Charitable Contributions of Clothing and Household Items

This includes furniture, furnishings, electronics, appliances and linens. Clothing and household items donated to charity generally must be in good used condition or better to be tax-deductible. 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.
Guidelines for Monetary Donations

A taxpayer must have a bank record or a written statement from the charity in order to deduct any donation of money, regardless of amount. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union 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.
Year-End Gifts

Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2015 count for 2015, even if the credit card bill isn’t paid until 2016. Also, checks count for 2015 as long as they were mailed in 2015.
IRS.gov has additional information on charitable giving, including:

Charities & Non-Profits
Publication 526, Charitable Contributions. Among other things, this publication has a detailed discussion of records to keep.
Online mini-course, Can I Deduct My Charitable Contributions?
Other tips in the Tax Time Guide series are available on IRS.gov.

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Keep your Health Insurance Documents with Your Tax Records

Gathering documents and keeping well-organized records make it easier to prepare a tax return. They can also help provide answers if the IRS needs to follow-up with you for more information.

This year marks the first time that you may receive information forms about health insurance coverage.

The information forms are:

Form 1095-A, Health Insurance Marketplace Statement
Form 1095-B, Health Coverage
Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
You do not need to send these forms to IRS as proof of your health coverage. However, you should keep any documentation with your other tax records. This includes records of your family’s employer-provided coverage, premiums paid, and type of coverage. You should keep these – as you do other tax records – generally for three years after you file your tax return.

When preparing 2015 tax returns, most people will simply have to check a box to indicate they and everyone on their tax return had health care coverage for the entire year. You will not need to file any additional forms, unless you are claiming the premium tax credit or a coverage exemption. In which case, you will use Form 8962, Premium Tax Credit, or Form 8965, Health Coverage Exemptions.

For more information about the information forms, see our Questions and Answers on IRS.gov/aca.

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Six Facts You Should Know Before Deducting a Charitable Donation

If you gave money or goods to a charity in 2015, you may be able to claim a deduction on your federal tax return. Here are six important facts you should know about charitable donations.

1. Qualified Charities. You must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible. An exception to this rule is contributions under the Slain Officer Family Support Act of 2015. To check the status of a charity, use the IRS Select Check tool.

2. Itemize Deductions. To deduct your contributions, you must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with your federal tax return.

3. Benefit in Return. If you get something in return for your donation, you may have to reduce your deduction. You can only deduct the amount of your gift that is more than the value of what you got in return. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.

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

5. Form to File and Records to Keep. You must file Form 8283, Noncash Charitable Contributions, for all noncash gifts totaling more than $500 for the year. If you need to prepare a Form 8283, you can prepare and e-file your tax return for free using IRS Free File. The type of records you must keep depends on the amount and type of your donation. To learn more about what records to keep see Publication 526.

6. Donations of $250 or More. If you donated cash or goods of $250 or more, you 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 you received any goods or services in exchange for the gift.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Additional IRS Resources:

Can I Deduct my Charitable Contributions?
Charitable Contributions – Topic 506
Publication 561, Determining the Value of Donated Property

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Bartering Produces Taxable Income and Reporting Requirements

Bartering is the trading of one product or service for another. Often there is no exchange of cash. Some businesses barter to get products or services they need. For example, a gardener might trade landscape work with a plumber for plumbing work.

If you barter, you should know that the value of products or services from bartering is normally taxable income. This is true even if you are not in business.

A few facts about bartering:

Bartering income. Both parties must report the fair market value of the product or service they get as income on their tax return.
Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. Exchanges must give a copy of the form to its members who barter each year. They must also file a copy with the IRS.
Trade Dollars. Exchanges trade barter or trade dollars as their unit of exchange in most cases. Barter and trade dollars are the same as U.S. currency for tax purposes. If you earn trade and barter dollars, you must report the amount you earn on your tax return.
Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.
Reporting rules. How you report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business.
Go to the Bartering Tax Center on IRS.gov for more information.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

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Save on Your Taxes and for Retirement with the Saver’s Credit

If you contribute to a retirement plan, like a 401(k) or an IRA, you may be able to claim the Saver’s Credit. This credit can help you save for retirement and reduce the tax you owe. Here are some key facts that you should know about this important tax credit:

Formal Name. The formal name of the Saver’s Credit is the Retirement Savings Contribution Credit. The Saver’s Credit is in addition to other tax savings you get if you set aside money for retirement. For example, you may also be able to deduct your contributions to a traditional IRA.
Maximum Credit. The Saver’s Credit is worth up to $4,000 if you are married and file a joint return. The credit is worth up to $2,000 if you are single. The credit you receive is often much less than the maximum. This is partly because of the deductions and other credits you may claim.
Income Limits. You may be able to claim the credit depending on your filing status and the amount of your yearly income. You may be eligible for the credit on your 2015 tax return if you are:
Married filing jointly with income up to $61,000
Head of household with income up to $45,750
Married filing separately or a single taxpayer with income up to $30,500
Other Rules. Other rules that apply to the credit include:
You must be at least 18 years of age.
You can’t have been a full-time student in 2015.
No other person can claim you as a dependent on their tax return.
Contribution Date. You must have contributed to a 401(k) plan or similar workplace plan by the end of the year to claim this credit. However, you can contribute to an IRA by the due date of your tax return and still have it count for 2015. The due date for most people is April 18, 2016.
Form 8880. File Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit.
Free File. If you can claim the credit, you can prepare and e-file your tax return for free using IRS Free File. The tax software will do the hard work for you. It will do the math and complete the right forms. Free File is available only through the IRS.gov website.
Use the Interactive Tax Assistant interview tool to help you determine if you qualify to claim the Retirement Savings Contributions Credit.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Additional IRS Resources:

Filing Your Taxes
IRS Tax Map
Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)
IRS YouTube Video:

Welcome to Free File – English

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Claiming a Tax Deduction for Medical and Dental Expenses

Your medical expenses may save you money at tax time, but a few key rules apply. Here are some tax tips to help you determine if you can deduct medical and dental expenses on your tax return:

Itemize. You can only claim your medical expenses that you paid for in 2015 if you itemize deductions on your federal tax return.
Income. Include all qualified medical costs that you paid for during the year, however, you only realize a tax benefit when your total amount is more than 10 percent of your adjusted gross income.
Temporary Threshold for Age 65. If you or your spouse is age 65 or older, then it’s 7.5 percent of your adjusted gross income. This exception applies through Dec. 31, 2016.
Qualifying Expenses. You can include most medical and dental costs that you paid for yourself, your spouse and your dependents including:
The costs of diagnosing, treating, easing or preventing disease.
The costs you pay for prescription drugs and insulin.
The costs you pay for insurance premiums for policies that cover medical care qualify.
Some long-term care insurance costs.
Exceptions and special rules apply. Costs reimbursed by insurance or other sources normally do not qualify for a deduction. For more examples of costs you can and can’t deduct, see IRS Publication 502, Medical and Dental Expenses. You can get it on IRS.gov/forms anytime.

Travel Costs Count. You may be able to deduct travel costs you pay for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 23 cents per mile for 2015.
No Double Benefit. You can’t claim a tax deduction for medical expenses paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free.
Use the Tool. Use the Interactive Tax Assistant tool on IRS.gov to see if you can deduct your medical expenses. It can answer many of your questions on a wide range of tax topics including the health care law.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Additional IRS Resources:

Schedule A (Form 1040), Itemized Deductions
Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
IRS YouTube Video:

Medical and Dental Expenses – English | Spanish | ASL
IRS Podcasts:

Medical and Dental Expenses – English | Spanish

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What are FTDs and why are they important?

Federal Tax Deposits (FTDs) for Form 941 are made up of withholding taxes or trust funds (income tax and Federal Insurance Contributions Act (FICA) taxes, which are Social Security and Medicare held in trust), that are actually part of your employee’s wages, along with the employer’s share of FICA. FTDs for Form 940 are taxes paid by the employer to provide for unemployment compensation to workers who have lost their jobs. Only the employer pays FUTA tax; it is not deducted from the employee’s wages. These taxes need to be paid as they become due in order to avoid penalties. If you have a deposit requirement, you must deposit electronically. You can deposit electronically via the Electronic Federal Tax Payment System (EFTPS). EFTPS deposits must be initiated by 8 p.m. eastern time the day before the due date. EFTPS is also used to pay other types of taxes; not just employment taxes.
Who Must Make Deposits?

Employers may have two separate employment tax deposits:
Employers filing Form 941, Employer’s Quarterly Federal Tax Return, with $2,500 or more tax due in the current quarter and $2,500 or more tax due in the prior quarter OR
Employers filing Form 940, Employer’s Annual Federal Unemployment Tax Return (FUTA), with over $500 tax due per quarter.
When To Make Deposits?

If you have a deposit requirement for Form 940, make the deposit by the last day of the first month after the quarter ends.
If you have a deposit requirement for Form 941, there are two EASY ways to remember:
Make a deposit the same day you pay your employees OR
Make the deposit before the due date.
Form 941 Deposit Due Date. If you are a new employer and have never filed 941 forms, you are aMonthly Schedule Depositor for the first calendar year of your business unless you are a special exception to the rule. Monthly Schedule Depositors should deposit taxes from all of their paydays in a month by the 15th of the next month, even if they pay wages every week.
Employers with prior payrolls and taxes of $2,500 or more per quarter must determine if they make either Monthly Schedule Deposits, or Semiweekly Schedule Deposits.
This determination is based on your Form 941 taxes during a four-quarter Lookback Period.
Identify your Lookback Period.

Your Lookback Period for Calendar Year 2016
2014
2015
July 1
to
September 30
3rd Quarter October 1
to
December 31
4th Quarter January 1
to
March 31
1st Quarter April 1
to
June 30
2nd Quarter

Add the total taxes reported during the Lookback Period.
Determine your deposit schedule.

If the total taxes you reported in the Lookback Period were: Then you are a:
$50,000 or less Monthly Schedule Depositor
More than $50,000 Semiweekly Schedule Depositor
Monthly Schedule Depositors

Deposit each month’s taxes by the 15th day of the following month (for example, taxes from paydays during July are deposited by August 15).
Semiweekly Schedule Depositors

For wages paid Saturday, Sunday, Monday, or Tuesday, deposit by the following Friday.
For wages paid Wednesday, Thursday, or Friday, deposit by the following Wednesday.
Exception!
If you accumulate a tax liability of $100,000 or more on any day during a deposit period, you must deposit the tax by the next business day, whether you are a monthly or semiweekly schedule depositor. Monthly depositors must then follow the semiweekly schedule for the rest of the year. For more information about the $100,000 One-Day Rule and the applicable deposit period, refer toPublication 15, Circular E, Employer’s Tax Guide, Depositing Taxes.
Remember!
Deposit rules are based on when wages are paid, not earned. For example, Monthly Schedule Depositors with wages earned in June, but paid in July, deposit August 15.
If the due date for a deposit falls on a non-business day, the deposit is considered timely if it is made by the close of the next business day. Business days include every calendar day other than Saturdays, Sundays, or legal holidays. The term “legal holiday” means any District of Columbia legal holiday. Previously, legal holidays included statewide legal holidays.
How Are Deposits Made?

Federal Tax Deposits (FTDs)

Making Federal Tax Deposits is a process most businesses must do throughout the year.
If you have a deposit requirement, you must deposit electronically.
Employers required to make deposits must deposit electronically. You can deposit electronically via the Electronic Federal Tax Payment System (EFTPS). The IRS encourages employers who are not required to deposit taxes to take advantage of EFTPS to avoid common errors and automate the payment process. EFTPS is fast, secure and available 24 hours a day, 7 days a week. Check out the most frequently asked questions about EFTPS: Publication 966, Choices for Paying ALL Your Federal Taxes (PDF).
If you are a new employer and received an EIN after January 2004, most likely you are already pre-enrolled in the Electronic Federal Tax Payment System (EFTPS) as part of our express enrollment (PDF) initiative for new businesses. You should have received a confirmation package with an EFTPS PIN and instructions on how to activate your EFTPS enrollment.
For more information on Express Enrollment for new businesses refer to Publication 4275 (PDF) found on IRS.gov.
For employer’s mailing address changes, complete Form 8822-B, Change of Address Form – Business.
If you have a deposit requirement, do not send tax payments with your tax return directly to the IRS. For more information, refer to “Depositing Taxes” in Publication 15, Circular E, Employer’s Tax Guide.
Need to make a same-day payment?

If an employer is unable to initiate an EFTPS payment in time to make a required deposit, a same-day wire transfer may be an option. Employers should check with their financial institution to find out if this service is offered and if there are any applicable fees associated with using this method to make a payroll deposit.

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Home Energy Credits Save Money and Cut Taxes

You can trim your taxes and save on your energy bills with certain home improvements. Here are some key facts to know about home energy tax credits:
Non-Business Energy Property Credit
Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.
The other part of the credit is not a percentage of the cost. It is for the actual cost of certain property. This may include items like water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.
This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
Your main home must be located in the U.S. to qualify for the credit.
Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.
You may claim the credit on your 2015 tax return if you didn’t reach the lifetime limit in past years. Under current law, this credit is available through Dec. 31, 2016.
Residential Energy Efficient Property Credit
This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
The home must be in the U.S. It does not have to be your main home, unless the alternative energy equipment is qualified fuel cell property.
This credit is available through 2016.
Use Form 5695, Residential Energy Credits, to claim these credits. For more information on this topic, refer to the form’s instructions. You can get IRS forms anytime on IRS.gov/forms.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

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Change Your Name? It Can Affect Your Taxes

A name change can have an impact on your taxes. All the names on your tax return must match Social Security Administration records. A name mismatch can delay your refund. Here’s what you should know if you changed your name:

Report Name Changes. Did you get married and are now using your new spouse’s last name or hyphenated your last name? Did you divorce and go back to using your former last name? In either case, you should notify the SSA of your name change. That way, your new name on your IRS records will match up with your SSA records.
Make Dependent’s Name Change. Notify the SSA if your dependent had a name change. For example, this could apply if you adopted a child and the child’s last name changed.
If you adopted a child who does not have a Social Security number, you may use an Adoption Taxpayer Identification Number on your tax return. An ATIN is a temporary number. You can apply for an ATIN by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS. You can visit IRS.gov to view, download, print or order the form at any time.

Get a New Card. File Form SS-5, Application for a Social Security Card, to notify SSA of your name change. You can get the form on SSA.gov or call 800-772-1213 to order it. Your new card will show your new name with the same SSN you had before.
Report Changes in Circumstances when they happen. If you enrolled in health insurance coverage through the Health Insurance Marketplace you may receive the benefit of advance payments of the premium tax credit. These are paid directly to your insurance company to lower your monthly premium. Report changes in circumstances, such as a name change, a new address and a change in your income or family size to your Marketplace when they happen throughout the year. Reporting the changes will help you avoid getting too much or too little advance payment of the premium tax credit.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

IRS YouTube Videos:

Premium Tax Credit: Changes in Circumstances – English | Spanish | ASL
IRS Podcasts:

Premium Tax Credit: Changes in Circumstances – English | Spanish

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