Document Value Of Donated Household Goods.
If you regularly count on Goodwill, the Salvation Army and others to find homes for what won't fit in your attic, garage or spare room -- all while getting a charitable tax deduction -- do your spring purging now.
That's especially true if you commonly fudge the value of donated items.
In 2007, the Internal Revenue Service will hold you accountable for accurately documenting the value of donated goods under a new tax edict tucked away in the Pension Protection Act of 2006, signed by President Bush this summer.
The broader act is aimed at curing the ailing defined-benefit pension system but it includes a host of unrelated provisions, including one that governs required, accurate documentation when you claim tax breaks for gifts, including household goods trucked off to charitable organizations.
Under the current law, the IRS pretty much takes you at your word when you claim a tax break for donations of money or items you've valued at up to $250. Documentation is required for larger amounts and, of course, if you are audited.
Next year, you might want to put a check in the Salvation Army's Christmas Kettle and make sure that futon is really worth $50 -- if you take the deduction.
Under the new provision, you won't have to file your receipts, canceled checks or other donation documentation, but you'd better have proof on hand.
IRS will keep tabs on you through a form that's already necessary when you give goods, IRS Form 8283, "Noncash Charitable Contributions" which comes with instructions, both of which you can download from http://www.irs.gov/.
Along with newly required documentation, the IRS will be beefing up enforcement of existing penalties that rain down on you if you overstate the value or adjusted basis of donated goods.
The penalty is 20 percent of the underpayment of tax related to the overstatement if the value or adjusted basis claimed on the return is 200 percent or more of the correct amount, and you underpaid your tax by more than $5,000 because of the overstatement.
The penalty jumps to 40 percent if the value or adjusted basis claimed on the return is 400 percent or more of the correct amount and you underpaid your tax by more than $5,000 because of the overstatement.
And of course you'll have to pay any taxes that were actually due.
The Salvation Army (http://www.satruck.com), Goodwill Industries (http://www.goodwillpromo.org) and other charities offer suggested values for a host of items, but it's up to you to make sure you get it right.
If you are a frequent household goods donator it makes sense to get more assistance from the source of the new rules. IRS Publication 561 "Determining The Value Of Donated Property" or theIRS Web page (http://www.irs.gov/) with the same name, both teach you how to value everything from aircraft and household goods and to real estate and stocks.
Written by Broderick Perkins
If you regularly count on Goodwill, the Salvation Army and others to find homes for what won't fit in your attic, garage or spare room -- all while getting a charitable tax deduction -- do your spring purging now.
That's especially true if you commonly fudge the value of donated items.
In 2007, the Internal Revenue Service will hold you accountable for accurately documenting the value of donated goods under a new tax edict tucked away in the Pension Protection Act of 2006, signed by President Bush this summer.
The broader act is aimed at curing the ailing defined-benefit pension system but it includes a host of unrelated provisions, including one that governs required, accurate documentation when you claim tax breaks for gifts, including household goods trucked off to charitable organizations.
Under the current law, the IRS pretty much takes you at your word when you claim a tax break for donations of money or items you've valued at up to $250. Documentation is required for larger amounts and, of course, if you are audited.
Next year, you might want to put a check in the Salvation Army's Christmas Kettle and make sure that futon is really worth $50 -- if you take the deduction.
Under the new provision, you won't have to file your receipts, canceled checks or other donation documentation, but you'd better have proof on hand.
IRS will keep tabs on you through a form that's already necessary when you give goods, IRS Form 8283, "Noncash Charitable Contributions" which comes with instructions, both of which you can download from http://www.irs.gov/.
Along with newly required documentation, the IRS will be beefing up enforcement of existing penalties that rain down on you if you overstate the value or adjusted basis of donated goods.
The penalty is 20 percent of the underpayment of tax related to the overstatement if the value or adjusted basis claimed on the return is 200 percent or more of the correct amount, and you underpaid your tax by more than $5,000 because of the overstatement.
The penalty jumps to 40 percent if the value or adjusted basis claimed on the return is 400 percent or more of the correct amount and you underpaid your tax by more than $5,000 because of the overstatement.
And of course you'll have to pay any taxes that were actually due.
The Salvation Army (http://www.satruck.com), Goodwill Industries (http://www.goodwillpromo.org) and other charities offer suggested values for a host of items, but it's up to you to make sure you get it right.
If you are a frequent household goods donator it makes sense to get more assistance from the source of the new rules. IRS Publication 561 "Determining The Value Of Donated Property" or theIRS Web page (http://www.irs.gov/) with the same name, both teach you how to value everything from aircraft and household goods and to real estate and stocks.
Written by Broderick Perkins
posted by SoldByWallen-Bob Wallen at 8:25 AM
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