Thursday, August 30, 2007

Tips on Tax Deductions for Charitable Contributions (VI)

Lobbying Restrictions for Tax Exempt Organizations

As long as 501(c)(4), 501(c)(6), or 501(c)(19) organizations are
primarily involved with tax-exempt activities, they can engage in a
substantial amount of lobbying. However, lobbying may not be a
substantial part of the activities of a 501(c)(3) organization. As noted
by the IRS, if a contribution to a 501(c)(3) is earmarked for lobbying
efforts, it is not deductible as a charitable donation. Permissible
levels of lobbying expenditures are clearly specified for 501(c)(3)
groups that elect to come under the alternative lobbying criteria of the
Tax Reform Act of 1976.


When Goods and Services are Involved

A payment to a charity qualifies as a deductible gift only to the extent
that it exceeds the fair market value of the privilege or benefit the
"donor" receives in return for that gift. For example:

* One cannot deduct the full amount paid to a charity for such items as
candy or magazines. If the charity charges $10 for a box of candy that
normally sells for $8, only $2 can be claimed as a charitable
contribution.

* The purchase price of tickets to a fund raising dinner, circus, or
other meal or entertainment event is not fully deductible. Only the
portion of the ticket price above the value of the meal or entertainment
can be deducted for income tax purposes. The same rule applies even if,
at the suggestion of the soliciting organization, the donor decides to
let the charity give his or her tickets to underprivileged or disabled
children.

Likewise, even if the charity refers to the entire purchase price as a
"donation," the portion of the price that reflects the value of the
admission is not deductible.

* Membership dues that merely cover the cost of privileges or benefits
received by the "donor" are not deductible. However, "dues" that actually
constitute a contribution for which the donor receives little or no
privilege or benefit of monetary value in return are deductible.

* The price of participating in a raffle or similar drawing cannot be
deducted as a charitable donation.

Tips on Tax Deductions for Charitable Contributions (VI)

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Thursday, August 23, 2007

Tips on Tax Deductions for Charitable Contributions (V)

General Tips on Deducting Contributions

1. Contributions are deductible for the year in which they are actually
paid or delivered. Pledges are not deductible until the year in which
they are paid.

2. The value of volunteer time or services to a charitable organization
is not deductible. However, out-of-pocket expenses directly related to
voluntary service are usually deductible.

3. Contributions for which the donor receives a gift or other kinds of
benefits are deductible only to the extent that the donation exceeds the
value of any benefit received by the donor. (See "When Goods and Services
are Involved...")

4. Direct contributions to needy individuals are not deductible.
Contributions must be made to qualified organizations in order to be tax
deductible.

5. Contributions made directly to foreign organizations are not
deductible, except in the case of some Canadian organizations as
specified in an agreement with that country. Also, donations to charities
located in Puerto Rico, the Virgin Islands, and other U.S. possessions
are deductible. Such organizations must meet the requirements for
exemption under the income tax laws of the United States.

6. The "fair market value" of goods donated to a thrift store is
deductible as long as the store is operated by a charity. To determine
fair market value, visit a thrift store and check the "going rate" for
comparable items. One cannot take a deduction if the goods are sold on a
consignment basis whereby the original owner gets a percentage of the
final sales price.

7. Donated property may generally be deducted at the fair market value of
the property at the time of the contribution. In certain situations,
additional details concerning the property's worth may need to be filed
with the IRS in order to make a deduction on your federal income tax
forms. Also, gifts of appreciated property are subject to special rules.
See a financial advisor for additional details.

8. PAS advises donors to seek professional advice or to consult the IRS
when in doubt about the deductibility of contributions. The following IRS
pamphlets, available through local IRS offices, also provide useful
information.

Pub. 448: "Federal Estate and Gift Taxes"
Pub. 526: "Charitable Deductions"
Pub. 529: "Miscellaneous Deductions" (e.g., political contributions,
labor union dues as an employee expense)
Pub. 535: "Business Expenses and Operating Losses"
Pub. 557: "Tax-Exempt Status for Your Organization"
Pub. 561: "Determining the Value of Donated Property"
Pub. 585: "Voluntary Tax Methods to Help Finance Political Campaigns"

Tips on Tax Deductions for Charitable Contributions (V)

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Friday, August 17, 2007

10 Ways To Reduce Tax Burden For Your Small Business (II)

Did you know that:

1. According to law you can reduce your tax liability by hiring family members to carry out work in your business. Pay your children and spouse to perform assigned duties. This way you can shift from higher tax rates to lower ones. 2. Consider hiring independent contractors instead of employees. You will save on payroll taxes. However ensure that you meet the IRS’s criteria.

3. Think about “deferring income” postpone receiving money to January instead of December. This means that payments received will be up for “tax” calculations a year away. However ask your accountant’s advice as the benefits are dependant on profit and losses for the year and your corporate legal structure.

4. Take advantage of tax deductions allowed for charitable donations. Make donations in November or December instead of January so that you can include the donations for tax deductions in the current year.

5. Maximize your expenditure on equipment and office supplies. Buy in advance for a quarter and use the tax deductions allowed in the current fiscal year.

6. Include expenses of business related travel in the current year.

7. Pay all bills due before the end of the year. Payment to cell services, rent, insurance, and utilities related to the business can be included for accounting and applicable tax waivers.

8. Plan a retirement plan and make payments before the end of the year. This will reduce your income for the year and proportionately the tax due. Be sure to check on the limits. Plan a feasible and beneficial strategy with your accountant.

9. Be sure to deduct from your taxable income money paid to licensing fees, businesses taxes, and annual memberships to businesses related organizations. Be sure to deduct interest paid on borrowings for running the business and related fees. Insurance premiums paid to insure the business office and machinery are eligible for tax deductions. Make a list of your memberships and check which ones are eligible for tax deductions.

10. Check whether you have deducted management and administration expenses as well as money spent on maintenance and repairs of equipment.

Decide whether a cash accounting system or accrual one will benefit your business. The tax deductions are different depending on the system you use. When setting up your small business take the advice of a tax and accounting professional as to which accounting system would be most suitable.

About the Author: Paul Wilson is a freelance writer for Legal Advice Discussion, the premier REVENUE SHARING discussion forum for Legal Advice Forum including topics on legal advices, legal information, lawyers, laws, tax, legal insurance and more. He also freelances for the premier Taxes Article Submission Directory site.

10 Ways To Reduce Tax Burden For Your Small Business (II)

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Thursday, August 09, 2007

10 Ways To Reduce Tax Burden For Your Small Business (I)

by PAUL WILSON

will not just have a string of impressive credentials or gold lettering on his door. He or she will be caring, concerned, and devoted to their work. You need to think carefully before laying your trust in a lawyer after all in some cases your life, future, money or property will be in his hands.
Apart from doing extensive research to short list possible lawyers you must ensure that there is not conflict of interest, that you understand everything the retainer agreement states, and that you have checked the references and details regarding the practice.

You will know the lawyer you have chosen is the perfect one if:

1. He makes an effort to spend time to understand your case himself. He will not assign a legal assistant to take facts of the case down.

2. From experience and knowledge he will know what is relevant and what is not. He will set aside and ignore irrelevant facts, opinions, and personal emotions that cloud the case on hand.

3. He will insist that the footwork for the case be done thoroughly. All facts must be checked for accuracy and solid arguments jotted down with backing of earlier rulings.

4. He will not just focus on the problem at hand but examine the problem from all sides. This will create a complete picture highlighting all factors of relevance and the different ways one can approach the case.

5. He will use his foresight and anticipate moves by the opposition or opinions of the jury or judge and plan way ahead. Like a master chess player he will plan the case not by the day but by many hearings ahead.

6. He will not waste time beating around the bush or create verbose statements—many words strung together which look impressive but mean nothing. He will insist that the case and its arguments be clearly stated.

7. He will be self-disciplined, thorough, and self confident. Courteous at all times he will respect you as well as all the staff who work for him.

8. He is recommended by not just his friends and relatives but by other professionals of good standing and from his field.

9. He will not just present to you his victories but be happy to tell you why and how he lost certain cases.

10. He will lay the cards on the table and tell you clearly whether your case stands to win or loose. He will not claim that winning is guaranteed. He will be honest and upfront about his opinions and advice.

The bottom line is that the lawyer must be worthy of your trust. Use your inborn instincts and don’t go by the lawyer’s good looks or fancy car or office. After all it is competence in law and in court that is of essence to you.

Everyone worries about taxes and looks for ways and means of reducing the tax burden. When you have a small business of your own you must up date your knowledge of tax laws that pertain to “small businesses.” As a business owner you must understand clearly about accounting systems and tax planning. Sit down with your accountant and plan on ways of maintaining business expenses, filing receipts, planning on “tax saving” investments, and a strategy for running the business in the most beneficial way.

10 Ways To Reduce Tax Burden For Your Small Business (I)

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Wednesday, August 01, 2007

Tips on Tax Deductions for Charitable Contributions (IV)

Other Tax Deductible Contributions

In addition to the 501(c)(3), 501(c)(19), and the kinds of 501(c)(4)
organizations previously named, the following classifications of tax
exempt groups are eligible to receive contributions deductible as
charitable donations:

* Cooperative hospital associations-501(e).
* Cooperative service organizations of operating educational
organizations-501(f).
* Nonprofit cemetery companies [501(c)(13)], if the contribution is
given for care of the cemetery as a whole rather than for a particular
plot.
* Domestic fraternal societies and associations [501(c)(10)] and
fraternal beneficiary societies and associations [501(c)(8)], if the
contributions are used for charitable [that is, 501(c)(3)] purposes.
* Corporations organized and tax exempt under an Act of Congress, which
serve as instrumentalities of the U.S.-501(c)(1). Examples include the
Reconstruction Finance Corporation, Federal Reserve Banks, and Federal
Credit Unions.

Tips on Tax Deductions for Charitable Contributions (IV)

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