What Not To Do On Your Taxes According to Experts

Being careful is import when completing your taxes and this year should make you a little bit nervous if you are preparing your taxes yourself. Even professionals are making a lot of mistakes according to the Government Accountability Office.

In a study done in 2014, 10% of preparers did not calculate a normal tax return correctly. The final error rates for tax preparation according to the study was 50% for self-prepared returns and 60% for professionally prepared returns. Of course, the professionals more than likely handle the tough returns. Still, those are alarming numbers.

Some errors are obvious mistakes while others are harder to deduct, keep these difficult areas in mind this tax season: foreign investments, charitable giving, real estate taxes, gambling winnings, and state refunds.

If you have foreign investment accounts or savings accounts, make sure to report them to the IRS. If the IRS is able to discover the account later, you can face a penalty up to $10,000.gaooffice

When making contributions to charity, keep a record so you can prove that you gave to a qualified charity. And when purchasing an item for a charity event, you can only deduct the portion above the value you are receiving.

Real Estate taxes can be a trick if you just purchased the home as some are paid on the closing statement. And an office in the home is a great deduction, but make sure not to claim more space than the office occupies.

If you have gambling winnings during the year, offset those winnings with loses you experienced and documented. You can’t take a lose of gambling, but limiting the amount of your winnings that is taxable is really nice.

Finally state refunds. State refunds on tax return filings are taxable the next year as income on the federal return. Yet federal tax refunds are not taxable, you get to keep the full amount of those funds.

 

 

Ways to make the Most out of a Charitable Donation

Any way you slice it, charitable donations are a plus for everyone involved. When you decide that it’s finally time to give back, there are countless ways to do so. But how do you make the most out of your decision to help out? There certainly isn’t anything wrong with maximizing your return on your donation, and helping out is easy. Here are a few things you may want to consider.

Volunteer

This is the simplest way to give back to your local community, and potentially the most rewarding. Anyone can donate money, but to give up your free time in the support of the less fortunate is truly the definition of charitable. Every community is loaded with opportunities to do so. From food banks to home repair to hospitals and retirement communities, the possibilities are as endless as they are rewarding.

Make a donation

If volunteering is not in the cards for you for whatever reason, consider making a donation. Again, there are tons of options here. Although passing cash out of your car window may not be ideal, donation money to a charity is nearly as simple. Food banks take canned and dry goods, many places will take a bag of clothes off your own front step, and there are plenty of places to drive in and drop off. Consider that every time you drop off a bag of clothes, you are also lightening your own, certainly overstuffed closet. many people have clothes that are perfectly fine, and have not been worn in years, sometimes decades. Release yourself from this burden of too much stuff while helping people clothe themselves. This is especially true during the winter, when people are trying to stay warm.

Make a gift out of it

Everyone has an aunt or uncle who during the holidays donates money toward a well in Africa or an animal in India. Although it’s true that these gifts can sometimes be a bore to open, they do immense good across the world. Giving the gift of clean water or life giving goat to people you will never meet is still a worthwhile endeavor and makes everyone feel better about themselves. There are many online sources for this type of donation, so finding one is a snap. Plus, you get the added benefit of:

Writing it off

Nearly all of your charitable donations can be used as a tax write off. Donations of food, clothes, furniture, cars, and computers just to name a few will certainly come with a receipt that can be plugged into your taxes to lighten your own burden come that time of year. While this shouldn’t be your driving force for helping out(after all, how much write off can one person possibly have), it is a bonus for you for helping others. So, with no negatives involved at all, why not help out with a donation of your time, money, food, or old clothes and household items? It truly is a win-win for all parties involved.

George Gallagher is a persona finance writer and blogging enthusiast.  He has also been working with students to fund their education with the best private student loans.

Rules for Charitable Contribution Deductions

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Charitable contributions made to qualified organizations through the year may help reduce your tax bill.  Many organizations give donors pertinent details about their tax-deductible donation including the amount that can actually be reported on your tax return.  The following tips may help ensure donation made will be beneficial on your taxes.

  • Make sure you report charitable contributions on the correct form. The IRS states that form 1040 must be used to itemize deductions using Schedule A.
  • Upon reporting the deduction, make sure it was made to a qualifying charitable organization.  Contributions reported shouldn’t be donations made to individual or political organizations.
  • There are rules to review if your contribution included a vehicle.  Clothing and other goods should be fair market value and in good condition in order for it to deductible.
  • Items received for making a contribution such as ball game tickets or services; deduct the amount that exceeds fair market value.
  • When reporting cash contributions, make sure you have proper documentation that proves the amount.  This may include bank statements, a correspondence from the organization or even paystubs if donations were made via payroll deduction.  A phone bill will suffice for text donations as long as it states the name of the organization, date of donation and the amount given.
  • Donations of $250 or more must have proper documentation such as a bank record or written notice from the qualifying organization.  You may need to report if you were given anything in exchange such as any gifts or services. Noncash donations of $500 or more should be reported on IRS Form 8283 (Noncash Charitable Contributions) and attached to your tax return.
  • If you donation was an item that valued over $5,000 an appraisal is required.  Obtain an appraisal from a qualified appraiser and report data on the IRS Form 8283 section B.

Additional details can be reviewed in the IRS Publication 526: Charitable Contributions.  Information regarding property value can be review in IRS Publication 561: Determining the Value of Donated Property.  It is important to report contributions to the best of your knowledge with honesty.  The IRS may question donations made and contact you for proof.  If you are found to have provided false information on your federal income tax return, you may face penalties.  Contact a tax professional with questions or concerns about charitable contributions made.

Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to how to setup an umbrella company.