Make Sure Your Charitable Contributions Are Deductible
The IRS has increased the record keeping requirements for cash charitable deductions under $250. Under prior law, cash donations of under $250 could be documented by a simple record maintained by the taxpayer. For example, if you donated $10 per week ($520 per year) at church, you could document the donations by simply keeping a record log. Under current law, for donations under $250, you must now maintain a bank record (such as a canceled check) or a detailed written receipt from the charity. Under current law, if you donated the same $10 per week in cash you could NOT claim a deduction unless the church gave you a written acknowledgment of how much you contributed during the year. If you donated a $10 check every week, you could claim the deduction based on your canceled checks.
The rules for cash gifts of $250 or more have not changed. These donations require a written acknowledgment from the charity. Bank records will not suffice for cash donations over $250.
Big Business May Take Big Tax Hit
The IRS has proposed to FedEx the reclassification of its delivery drivers as employees, rather than as independent contractors. If the IRS succeeds in the reclassification, FedEx will owe tax and penalty of $319 million plus interest for misclassifying the drivers.
Here are a couple of tax-saving provisions of the new Economic Stimulus Act that haven’t gotten as much attention as the stimulus rebate checks about to be sent out.
Increased Section 179 Deduction
Section 179 allows first year expensing of certain depreciable property. Quick example–if you purchase a piece of machinery for $20,000, you could normally depreciate the property over five years, taking a $4,000 deduction each year. Under the new Section 179 limits, in 2008 you can deduct up to $250,000 ($125,000 in 2007) per year of qualifying property. Instead of deducting that $20,000 piece of machinery over five years, you could deduct the entire purchase price ($20,000) in 2008. For 2009-2010, the maximum deduction will revert back to $125,000. One of the limits of Section 179 is that it is limited to the taxable income of your business. For example, if your taxable income is $10,000. Your Section 179 deduction in the above example would only be $10,000. The remaining $10,000 of Section 179 deduction would be carried forward into future years.
Bonus 50% Depreciation
Under this rule, your business can immediately write off 50% of the cost of qualifying assets in the first year. The remaining cost can be deducted either through Section 179 or through regular depreciation deductions. Unlike Section 179, there is no taxable income limitation. For example, if you purchase a $30,000 piece of equipment and your taxable income is $5,000. You could claim bonus depreciation of $15,000–taking your taxable income down to a $10,000 loss. You could then claim regular depreciation on the remaining purchase price.
IRS Issues Warning Regarding Stimulus Rebate Check Scams
The IRS has issued warnings regarding e-mail and phone scams regarding the Economic Stimulus Act rebate checks. To view the warning, click on http://www.irs.gov/newsroom/article/0,,id=178061,00.html
Welcome and thank you for checking out my blog. As I develop this blog, I’ll be organizing the blog into six sections:
1. Tax tip of the week
2. Tax scam of the week (this will include disreputable tax strategies and other scams such as phishing emails supposedly sent by the IRS)
3. My own free-market-capitalist opinion on upcoming changes in the tax laws and in other business legislation.
4. For those of you who can’t get enough celebrity gossip, I’ll be posting news on the tax troubles of celebrities and big business.
5. Business book reviews
6. Recipes for tasty chicken dishes (or not)
I’ll keep the postings as short and to the point as possible. I spend several hours a week reading up on tax and business news and I’ll try to distill that info into a few paragraphs.