IRS offers tips for donating
After the Christmas season comes to a end, many people will begin making preparations for the new year.
Larry Golden gives a truckload of items to Goodwill employee Christine Butler in Evans. Goodwill Industries employees have seen an increase in the number of people dropping off donations before the end of the year.
Photo by Jim Blaylock
While some vow to remain faithful to their New Year's resolutions, others will celebrate 2005 spending dough from their tax returns.
Eric Erickson, a spokesman for the Internal Revenue Service, says taxpayers should be aware of many tax-deductible opportunities this holiday season for those hoping to make donations to a charity.
"Whether you're donating a car or you want to give a monetary donation, make sure you're (giving) it to a tax-exempt organization," he said, stressing that donors should get a receipt for the items they donate. "That way, if we come back with any questions with that donation, you have all of the proper documentation to prove that you donated to a qualified organization."
According to the official IRS Web site, www.irs.gov, the government recognizes donations to nonprofit groups that are charitable, religious, scientific, educational or literary in purpose, or groups that work to prevent cruelty to children or animals. Organizations such as political parties, labor unions and sports clubs are not recognized by the IRS.
In order for taxpayers to reap the benefits of their tax-deductible donations in April, they must make their donations before Jan. 1.
Michael Salazar, a public accountant and enrolled agent in Martinez, said donors should not make charitable donations in vain.
"Sometimes when I'm interviewing people for their taxes, they'll say I gave five bags of clothes to a family whose house burned down," he said. "Then I'll say, really and truthfully, that's not a charitable donation (because) the family in need is not recognized by the IRS as a charitable organization. It's not a true deduction."
Salazar said people should make a donation to a church, fire department, or group such as the Salvation Army.
He said a receipt should be obtained for any monetary donation of $250 or more.
"Say you go to your church and you contribute $10 a week for 52 weeks, that's $520," he said. "You are supposed to provide a documentation for that donation."
When donating clothes and household goods, Salazar said, the IRS prefers donors to make a detailed list of every item donated.
When donating cars, Erickson said, this is the last year for donors to receive the fair market value of their car, which means next year donors who donate cars worth more than $500 will be limited to the gross proceeds.
"Say you donated a car to an organization and the car is worth $1,000 and (the charity) turns around and sells it for $600. Well anything over $500 you can only deduct for the amount that they sell it for. So if they sold it for $600, even though it's worth $1,000, (the donor) can only deduct $600."
However, if the charity significantly uses or materially improves the vehicle, then the charity has to vouch for its intended use and notify the donor, said Meredith Vasquez, the executive director of Goodwill Industries Inc. for the area. She said this is the only alternative for a donor to deduct the vehicle's fair market value.
Vasquez said Goodwill, which accepts donated items such as cars, furniture, toys, household items and clothing, resells those items to the public. The organization's Web site, www.goodwill.org, is available to donors to help them document and itemize their charitable donations.
In addition to tax deductions, Erickson said, tax payers can call the IRS to find out about earned income tax credits, which can result in a "sizable refund for many people."
"It's a good time to start thinking about those credits and things to see which ones (taxpayers) qualify for," he said.