What Documentation Do I Need for a Charitable Contribution Deduction?

 

Cathy Robinson, CPA

Senior Manager

robinson@hwco.com

You have made your charitable contributions during the year, now it is time to gather them for your tax return preparation.  What documents do you need to retain?

The IRS requires the donor maintain either a bank record or a receipt from the donee with the donee’s name, contribution date and amount for a cash donation.

 

For a payroll donation, the donor should retain the pay stub or documentation for the amount withheld with payment to the charitable organization. 

For a noncash donation of less than $250, the donor should maintain a receipt from the donee with the name, date, and a description of the items donated.  The donee will not provide a value of the donated property.

For contributions of $250 or more, the donor should maintain the written acknowledgment from the donee.  The following items should be included in the acknowledgment:  amount of cash or property description and a value of the goods or services exchanged for the contribution.

For noncash contributions of more than $500, the donor must list on their tax return a written description of the donated property and any other information required by the IRS.  If the donation is a vehicle, there are additional reporting requirements.  If there is a noncash donation of $5,000 or more, a qualified appraisal must be attached to the return.

When in doubt of what is required, contact your tax preparer with any questions. 

Need a Gift Idea?

 

 

Cathy Robinson, CPA

Senior Manager

robinson@hwco.com



How about starting or contributing to a 529 College Savings Plan account?

You can set up a Plan operated by a state or state agency and name anyone as a beneficiary.  The contributions cannot exceed the amount necessary to provide for the qualified education expenses.  Remember, any gifts in excess of $14,000 will be taxable.  Since you will be the purchaser, you will control the funds until they are withdrawn for educational expenses.

The earnings from a 529 Plan are not subject to Federal taxes and may not be subject to state tax if the money is used for educational expenses for college.  For the state of Ohio, $2,000 per beneficiary can be deducted on the individual income tax return and any excess can be carried forward to deduct in future years.

So again, I ask, need a gift idea? Getting started on affording a college education is something you or your beneficiary will not forget.

FASB Makes Changes to Not-for-Profit Accounting Standards Update

 

 

Daniel Kaminski, CPA

Senior Manager

kaminski@hwco.com

 

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Proposed Accounting Standards Update (ASU) No. 2015-230, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities.  One of the most controversial items in the ASU was the requirement that not-for-profit organizations would be required to present their statement of cash flows using the direct method.

The FASB received comments that requiring the use of the direct method would cause significant challenges.  Not-for-profit organizations felt that it would be difficult for readers of their financial statements to make comparisons with for-profit companies who would not be required to use the direct method.  The second common complaint came from smaller not-for-profits who felt that using the direct method would cause them to incur significant costs, either internally or by increased costs from their outside accountants.

 

As a result, on December 11, 2015, the FASB made the decision it would not require not-for-profit organizations to use the direct method, but would give them the option to use the direct method or the indirect method.  However, this was not the FASB’s only change.  Currently, U.S. generally accepted accounting principles (GAAP) allows for a choice between using the direct method or the indirect method.  However, if the direct method is chosen, the indirect method must also be presented.  However, the FASB has decided it would no longer require the presentation of the indirect method if an organization chooses to present their statement of cash flows under the direct method.

Even though the direct method can be more useful to financial statement users, since the indirect was required to be presented, very few organizations chose to do the additional work or presenting under the direct method as well.  The FASB’s hope is that by eliminating the requirement to also present the indirect method; more organizations will choose to use the direct method.

 

The FASB also clarified a few other items in the ASU.  The FASB had previously decided to reduce the number classifications of net assets from three to two.  They officially decided the two new classifications will be called “net assets with donor restrictions” and “net assets without donor restrictions.”  In addition, the FASB will require the purpose of board-designated net assets to be disclosed either on the face of the financial statement or in the notes.  The FASB also is requiring the aggregate amount that endowment funds are underwater be included in net assets with donor restrictions and is requiring enhanced disclosures about the underwater endowment funds.

Opposition to the Department of Labor proposed overtime rules

 

 

Anthony S. LaNasa, CPA

Managing Principal - Columbus

lanasa@hwco.com

 

On June 30, 2015 the Department of Labor (DOL) released a proposal to update the Fair Labor Standards Act’s (FLSA) overtime rules.  These proposed changes would increase the number of workers who qualify for overtime pay by modifying the FLSA’s overtime exemptions and increasing the minimum salary for those that are exempt.  The DOL is expected to finalize the rule in mid-to-late 2016.

This week the Partnership to Protect Workplace Opportunity, a coalition of employer groups that includes a diverse collection of associations, businesses, and other stakeholders representing employer across the country and in almost every industry, sent a letter of opposition to Congress.  The letter was signed by many national and state associations, including the Ohio Society of CPAs and 16 other state CPA societies.

The letter reads, “The magnitude of DOL’s proposal, coupled with the annualized automatic increases with no feedback from employers, and the changes to the duties test that DOL is considering, threaten businesses, employees, non-profits, state and local governments, and the economy as a whole.  According to the Department’s own estimate, as a result of the minimum salary increase more than four million employees will need to be reclassified from exempt/salaried to non-exempt/hourly and the rule will affect over ten million workers; that is more than the populations of Maine, New Hampshire, Rhode Island, Montana, South Dakota, Alaska, North Dakota, Vermont, Washington and Wyoming combined.”

The letter goes further to say, “The millions of employees converted from exempt to nonexempt status would lose the flexibility that they currently enjoy and have fewer opportunities for career advancement.  Hourly employees are not guaranteed any fixed weekly pay—like salaried employees—or guaranteed any specific hours.”

The letter concludes for congress representatives to contact the DOL, Office of Management and Budget’s Office of Information and Regulatory Affairs, and other officials within the Administration and urge them to reconsider this rule.

Tax Extenders Still Have Not Passed So What Should I Still Be Doing?

 

 

 

Cathy Robinson, CPA

Senior Manager

robinson@hwco.com

 

 

Okay, it is December and Congress has not yet taken any action on provisions which have expired at the end of 2014.  There are still some things you should consider doing before year end:

 

1.       Review your withholding and estimated tax payments for 2015. 

2.       Consider if you are liable for the alternative minimum tax in 2015. 

3.        Consider realizing losses on stock to offset gains.

4.       Postpone any additional income until 2016.

5.       Accelerate any deductions in 2015.  Consider using your credit card to pay for the deductible expenses.

6.       Bunching of any expenses.  For example, pay three real estate bills in a year.

7.       Ask your employer to defer your 2015 bonus until 2016. 

 

These are just some suggestions in order to help eliminate an unpleasant surprise in April next year.  As with any tax advice you read or hear, you need to ensure the advice provided agrees with your tax situation.