Top Tips for Deducting Charitable Contributions

Giving is a reward in itself, but being able to deduct your charitable contribution come tax season is an undeniable perk as well.

However, you have to follow the IRS rules and regulations carefully when you deduct your charitable contributions. Here are some to tips straight from the IRS.

1. Qualified Organization: Make sure the organization you've donated to is a qualified organization. (Search here.)

2. Schedule A : You must file Form 1040 and itemize your charitable contributions on Schedule A.

3. Donation Gifts: Sometimes you'll receive gifts because of your charitable contribution, like tickets to a football game. If you do, you can only deduct the amount that exceed the fair market value of the benefit received.

4. Use the Fair Market Value Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible.

5. Get the Proof Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization. It should have the name of the organization, date you made the contribution, and the amount you donated.

Final Tip: In order to claim a deduction for the contributions you claim, the cash or property should equal $250 or more. Again, make sure you have a bank record, payroll deduction records, or written acknowledgment from the qualified organization before you claim the deduction!

The IRS Cracks Down on Millionaires...And You!

Today CNN Money has an interesting story about the IRS Cracking Down on Millionaires. The common believe is that the IRS goes easy on high income taxpayers, and drills down with no mercy on the little guys: the small business owners, the regular folks like you and me. Well, new numbers paint a different story.

The New IRS Unit

Last year, the IRS launched a new unit for monitoring high income taxpayers called the Global High wealth Industry Unit. From all the effort this took, it's clear the IRS has watchful eye on high income taxpayers.

Millionaire Audits Increase

There's been a significant increase of audits for very high income taxpayers over the last year. Look at the numbers:

- Taxpayers earning $10 million or more saw a 73% increase

- Those between $5 million and $10 million saw a 54% increase

- Taxpayers earning over $1 million saw a 15% increase

Audit Increases Across the Board

It's clear that high income taxpayers were hit hard last year, but IRS enforcement was boosted across the board. The IRS audited 4.58 million tax returns last year, and the trend continues to increase.

Prevent an Audit This Year
To be honest, your chances of being audited are slim. As long as you properly file your taxes and only claim deductions you qualify for, you should be safe from an audit.

Keep Your Records and Receipts

Keep your receipts and important documents on file for seven years, just in case the IRS decides to investigate or asks for further documentation. IRS Audits are still relatively rare compared to the amount of people who file each year, but they have doubled since 2001!

Kelly Osbourne Owes Over $30K to the IRS

Time for more celebrity tax news! This time the tax offender is from the infamous Osbourne family. Kelly Osbourne owes the State of California more than $30,000 in unpaid taxes!

The Debt:
Kelly owes exactly $34,763.30 to the State of California dating back to 2009. She has neither confirmed nor denied reports and government documents detailing her tax debt.

Though someone did send me this angry tweet she made:

“im getting less & less resilient to all the bulls**t stories i keep reading about myself i do enough stupid s**t no need to make things up! (sic)”

Kelly Osbourne's Net Worth:

Born into the lucrative Osbourne empire, Kelly didn't do half bad making a name, and some money, for herself.

She's reportedly making $15 million from her role in the reality show "Fashion Police."  She also has funds from a Closer Magazine column deal, acting projects, and her job as a spokesperson for a clothing line by Madonna. Obviously, there's enough income to cover her taxes!

Still a Mystery

I don't know what's the bigger mystery, how Kelly Osbourne managed to rack up such a big debt- or how she's made so many lucrative career moves. How she's worth $15 million...I just don't know. How she doesn't have the proper help to pay her California state taxes is another mystery.

The lesson rings clear here as always. No one gets away with not paying their taxes. You'd better pay yours this year, too!


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Read B School's Article 10 Celebs Who Hate Paying Taxes for more.

10 Tips for Safe Tax E-Filing: Protect Your Identity and Your Life

So many of you are skeptical about sharing your personal information online. After all, your entire identity is on the line: from your social security number to your bank account information.

Here are 10 tips for the safe filing of your Tax Returns. Do it right, and you can protect your life:


1. Watch What You E-mail: Even for filing purposes, don't send your social security number, bank account number, or other vital information to your spouse or accountant via e-mail.

2. Password Protection: All electronic tax returns (and software) will allow you to create a password. Make sure you create complex passwords (that include numbers) and write them down in your planner or somewhere safe so you always have access to them.

3. Distrust "IRS E-mails": The IRS themselves has said they will not send you an e-mail about filing your taxes directly. If you recieve an e-mail from the "IRS", ignore it. 

4. Watch out for "IRS Phone Calls": Don't give personal information on the phone to an agent claiming to be with the IRS. Hang up and protect your information.

5. Break out the Shredder: Shred uneeded documents that contain your social security numbers, credit card numbers, or bank account information before you throw them away.

6. Protect The Kids: Be sure to protect your children's social security information as well when you file your taxes online this year.

7. Clear the Cache: Clear your web browser's cache after filing your taxes online.

8. Update Your Protection: Make sure your anti-malware and virus protection programs are up-to-date to protect your important private information.

9. Back-up Computer Files: Don't leave documents that contain your vital information in files on your computer. Keep them protected in back-up drives. This saves your info in the event of system failure or a virus infestation on your computer.

10. Safe Mailing: Take caution even when you decide to mail your return in via snail mail. Use certified mail, and send your return from a secure location. Don't drop your return off in a drop box.


It's better to be safe than sorry... Identity theft is not as common as the media might lead you to believe, but it does happen. When it does, it's incredibly difficult to get your life back in order, sometimes it takes years. It's better to take the small extra steps that protect your information and file your taxes without worry.

IRS "Help Centers" Aren't So Helpful...

The IRS is proud to advertise their tax assistance centers. There are over 400 all around the USA, all ready to assist taxapayers with their difficult questions. The catch is that more than a third of taxpayers will have to travel an hour and a half or more to get to one.

Here are some examples from USA today:

• The six New England states make up an area that's one-fourth the size of Texas with 10 million fewer people, but New England has seven more assistance centers than Texas.

• Michigan has six centers that serve 10 million people in an area that's twice the overall geographic size of West Virginia. West Virginia has seven centers that cover 1.8 million people.

• Florida has nearly 50% more residents and is nearly 25% larger than Pennsylvania, but has only 18 centers vs. 21 in Pennsylvania.

It's good that the IRS is taking extra steps to help taxpayers in need, but its still not enough.Who knows what's longer, the IRS phone wait times, or the amount of time it takes to get to a service center.

Something needs to be done to make it easier for taxpayers to get one-on-one help with the IRS when needed. Until then, you can always e-mail me if you need help with anything. I'll get you the help you need.

Ja Rule Admits Stealing $1.1 Million from the IRS

Rapper Ja Rule recently had to confess that he dodged paying $1.1 million in federal income taxes in tax court. The $1.1 million was from nearly $4.4 million in royalties and live performance payments over the last five years.

Judge Patty Schwartz allowed 35-year-old Jeffrey "Ja Rule" Atkins to remain free (on $500,000 bail pending a scheduled June 13 sentencing). This will give him time to work on a new album before he spends two years in prison for a weapon's possession charge.

Ironically, his originally sentencing date was postponed so he could resolve his "tax problem".

Allowing his sentencing to be postponed so he can take care of his whopping tax debt shows just how important resolving your tax debt really is. Make paying and taking care of your tax obligations a priority in your life. Get it out of the way first and foremost, and then you can move on to the other obligations.

This is what Ja Rule should have done, but sometimes you have to learn it the hard way...

Tax Write Offs for Your Home Office

If you're self-employed and use part of your home as your workspace, you might be able to take deductions for it. However, you need to be cautious here. If you slip up, you can end up owing instead of saving.

Claiming Business Use in Your Home:

Be cautious when you are claiming portions of your home for business use. People frequently make mistakes with these kinds of deductions. The business portion of your home must be one of the three following:

• Your principal place of business;

• A place where you meet or deal with your patients, clients, and/or customers; or

• A separate structure not attached to your home.

It Doesn't Have to Be Exclusive

The business portion of your home doesn’t have to be used exclusively for business. Examples include using the space to store products or using the space as a daycare facility.

Get the Space Measurements

Many people use portions of their home for business purposes, if not run their business out of their home. You need to know what size the space is in order to have a complete deduction, which can save you money in the long run.

Just the beginning

There are many ways freelancers and self-employed workers can claim deductions and reduce the amount they owe the IRS. Review your receipts and records for the 2010 tax year and see what qualifies.

Which Saves You More: Standard or Itemized Deductions?

When you file your taxes, you can choose to either use the standard allowable IRS deductions, or to itemize your deductions. Which method you choose to reap the biggest savings depends on how much you've spent on certain expenses last year.

Expenses That Are Tax Deductible

If you paid for medical care, mortgage interest, taxes, charitable contributions, causality losses, or various allowable business expenses- you can reduce the amount of you'll owe the IRS after you file. Basically, if the total amount of money you've spent in the categories I've listed is more than the standard deductions, you're better off itemizing your deductions to save money. 

Standard Deduction for 2010

The IRS's standard deduction amounts are based on your filing status and are adjusted every year. For 2010, the standard deductions are:

- Filing Single: $5,700
- Married Filing Jointly: $11,400
- Head of Household: $8,400
- Married Filing Separately: $5,700
- Qualifying Widow(er) $11,400

Choose the Right one for You

Add up the eligible expenses you've made during 2010, and if what you've spent this year is more than the 2010 standard deduction, consider itemizing your deductions to reap the maximum amount of savings on your taxes that are possible. You can save hundreds or even thousands of dollars by doing this. It can really be worth the effort in the end.

Paying Off Your Lingering Tax Debt

I get plenty of e-mails from folks that have been paying off their tax debt for years. They're at a breaking point, they just want the debt gone. While they are not common, there are some solutions for getting rid of your long-lingering tax debt.

Settle Your Tax Debt

If you've been paying your debt for years, you might be able to settle the amount you owe. It's not easy or even likely that you can settle your tax debt. This is not a tactic to try without knowing all the facts. If it works for you, it could mean drastically reducing your debt. If it doesn't, it could mean opening the doors to bank levies and wage garnishments.

Give the IRS Good Reason to Settle

If you decide to attempt the settlement route, it's up to you to let the IRS know that you can't pay the debt in full before the statutes expire, and they could earn more money if they choose to settle now.

Do You Qualify to Settle Tax Debt?

Remember that most people will not qualify to settle their tax debt. The IRS does an extensive investigation, and if you have the ability to pay the debt before the statutes expire, you're out of lucky.

Don't let an old Tax Debt haunt you

If you feel like you qualify, apply for an Offer in Compromise using IRS Form 656 – Offer in Compromise. I earnestly advice you consult with a professional before making any moves to settle your tax debt.

Japan Earthquake Aid: How to Deduct Your Charitable Donations

Today Japan was devastated. An 8.9 earthquake triggered a tsunami and aftershocks that has created a massive amount of damage to the island Nation.

This earthquake is the strongest on record to ever hit Japan, and one of the fifth-strongest on the world record. The results are obviously catastrophic.

The deaths are in the hundreds, and the country will need relief for months to come.

The best way to donate to Japan Relief efforts is through The American Red Cross.

Your charitable contribution is tax deductible, but in order to qualify you must donate to a charity that is registered in the U.S. as a charitable organization.

Martin Scorsese Owes $2.85 Million in Back Taxes

Martin Scorsese has directed some of the most memorable movies of all time, with landmark films that include Taxi Driver, Raging Bull, and Goodfellas. He's an acclaimed oscar-winner, but the IRS doesn't care, they want their $2.85 million in back taxes!

Martin Scorsese's Tax Debt

Scorsese lives a lavish lifestyle. Born in Queens, he resides in a $12 million upper east side town house. This $2.85 million debt isn't his first tax trouble.
For six months between 2002 and 2003, the IRS hit him with three liens that totaled nearly $1.9 million.

The next year, New York State obtained a $149,437 tax judgment against him. The prior taxes were paid in full, but now he has new and bigger tax problems to contend with.

The Tax Scammer

According to the New York Post an anonymous source blames all of Scorsese's tax woes on his accountant Kenneth Starr. Supposedly, involvement with this tax cheat as early as the 1990s is what lead to serious tax troubles.

Is Martin Scorsese a Victim?

If you've been following along, you'll not that Al Pacino also balmes his $188K in tax debt on Kenneth Starr.

A spokewoman for Scorsese, Leseless Dart, said the IRS lien is "a complete mistake" and that Scorsese no longer owes money to the IRS.

"The IRS prematurely filed this lien even though Mr. Scorsese had an agreement with the IRS to make payments and was fully complying," Dart said. "As of this moment, the entire amount is full paid, and he has no current IRS debts."

The Punishment

The IRS won't take any excuses. $2.85 million is owed, and they'll do everything possible to collect it. The IRS will swoop in any profit Scorsese makes on sale of real estate, and worse. I hope he knows it'll be better to pay his debt than fight the IRS.

Al Pacino Owes More than $188K in Back Taxes

It feels like every day I'm reading about yet another celebrity that owes the IRS. In this celebrity tax debt case, it's Al Pacino that owes the IRS thousands in back taxes.

Al Pacino's Tax Debt

Al Pacino's movies have grossed more than $1 billion and he's a certified Hollywood big-shot; so why can't he hire competent accountants to file his taxes? His tax bill allegedly stems from his failure to pay taxes in 2008 and 2009. The total amount? More than $188,000!

Al Pacino's Back Taxes Breakdown

The IRS sent Al Pacino (now 70, by the way!) a bill for $169,143.06 for the unpaid 2008 taxes and $19,140.44 for his 2009 taxes, for a total of $188,283.50 according to documents from the IRS.

Bad Accountant Causes Massive Tax Debt

I give Al Pacino credit for giving the public an explanation for his debt, unlike most celebrities that keep silent. One of Al Pacino's spokespersons said he did not intend to overlook his tax obligation. He blames his tax debt on his former business manager, Kenneth Starr.

Kenneth Starr- The Accountant from Hell

Kenneth Starr was sentenced to 7 1/2 years in prison last week for a $33 million Ponzi scheme. Supposedly, the crooked attorney used money he scammed from his celebrity clientele, like Al Pacino, Uma Thurman, and Lauren Bacall, to finance a lavish lifestyle for himself and for his younger ex-stripper wife.

Getting it Back Together

Al Pacino's spokesman has stated he has new financial managers, and they're actively working to resolve his tax debt. This goes to show you, be careful who you trust to handle your finances. And, don't work with "celebrity accountants" with the last name "Starr" for starters...

Don't Claim False Deductions Like TV News Anchor Anietra Hamper

Looking good is a job requirement when you work for TV. News anchors must be fit and polished: requiring gym memberships and salon visits. This can add up to thousands- but do these expenses count as business deductions? 

Please, Don't Claim Your Thongs as Tax Deductions

News anchor Anietra Hamper applied for a whopping $167,356 in tax deductions between 2005 and 2008- nearly all expenses were for maintaining her appearance.

Hamper tried to write off everything:
 
business suits, lounge wear, sportswear, lingerie,  thong underwear, evening wear, jewelry, bedding, running and walking shoes, dry cleaning costs, self-defense classes, gym memberships, salon visits, and the list goes on...

Why The Tax Court Ruled Against Anietra Hamper 

Anietra Hamper wound up in U.S Tax Court for her excessive deductions, and the Tax Court ruled that much of the expenses claimed were personal ones. She now owes an additional $16,492 in taxes, plus $3,298 in fines!

The catch is that Anietra Hamper's dress code clearly stated that employees should buy clothing that could be worn "in any business day in a normal office setting". In other words, the outfits were not specific to her line of work.

The 3 Deductible Clothing Rules

1)  It's up to you to prove the clothing expenses are ordinary and necessary to complete your job.

2) If you are required to wear a uniform, the cost paid for these uniforms is almost always tax deductible since the uniform is necessary for you to work.

3) In some cases you can deduct clothing cleaning costs.

Take Anietra Hamper's Tax Court ruling as an example. Sure, get creative when you look for deductions and ways to save, but don't get out of hand. You don't want to end up owing instead of saving in the end. If you still have questions, feel free to e-mail me.

The IRS Has $1.1 Billion of Your Money

The IRS has $1.1 billion in its proverbial pockets thanks to the 1.1 million taxpayers who didn't file their 2007 tax returns. You have until April 18, 2011 to file your 2007 income taxes- or the IRS will keep your refund for good.

Yes, The IRS Can Keep Your Money

It's true, if you don't file your 2007 tax return by this year's tax filing deadline, your tax refund will revert back to the Department of Treasury. There will be no way to get that money back. According to IRS estimations, half of the refunds in question are $640 or more.

State Refunds are in the Thousands

The IRS release a chart that shows average refunds by state, and the amounts owed back to some individuals are in the hundreds of thousands (topping out at $129,205 for one individual in California). If you think you're owed a refund for 2007, it will definitely pay to file now.

If You Qualify, There's No Penalties

The IRS provides  three-year window of opportunity for claiming your refund, but only in certain cases. The good news here is that returns that 2007 returns that qualify for a tax refund will not be hit with a late filing penalty. You should be able to retrieve your money fine-free.

The Catch: The IRS will keep your refund if you owe back taxes or if you've neglected to file your 2008 and 2009 tax returns. If you happen to have past due student loans, past due child support, or other forms of federal debt, your returns may be applied to those debt amounts.

If you feel that you're owed a refund for your 2007 taxes, file your 2007 taxes before the April 18, 2011 deadline and claim your cash- before it's too late!

TaxMasters, Inc. Lawsuit Follow-up: How You Can Avoid Being Scammed

[Watch this hilarious TaxMasters Spoof]

TaxMasters, inc. along with the infamous Roni Deutch franchise- faced legal trouble around this time last year. The Texas Attorney General charged the company with unlawful business practices. As I looked back on the facts, I realized this lawsuit highlights some key signs you must avoid when looking for professional help.

Avoid High Pressure Tactics

"Before they could even get the contract to find out what the details were, they were charged money..."

- Texas Attorney General Greg Abbott

TaxMasters apparently employed high pressure tactics with their clients. Don't let anyone pressure you into paying them for help right then and there. You have a right to read contracts, take part in consultations, and ask questions before you pay one red cent.

Avoid "Pennies on the Dollar" Claims

TaxMasters' aggressive ad campaign consistently promised callers they could have their tax debt settled for low amounts. The fact I'll say again and again is that the IRS is not in the business of settling tax debt.

A "Tax Debt Settlement" (Offer in Compromise) is only for extreme cases, very few people will qualify. Avoid companies or individuals that claim you will qualify off the bat without looking into your tax situation.

Not All Tax Help is Bad

Companies like TaxMasters, Inc are giving the rest a bad name. Not all tax representation companies and individuals (like CPAs, IRS licensed enrolled agents, and attorneys) are bad people.

They are not all out to rip you off. If you need help, definitely seek it. Just make sure you do a little research on the company (check their BBB Rating, for example) to make sure you've picked the right one.

More Unbelievable Tax Deductions: What Can You Get Away With?

I've written about various outlandish tax deductions on this blog before.

For the most part, as long as you can prove an expense is ordinary and necessary for your line of work, you can write off items as seemingly ridiculous and breast implants.

Today a CNN cover story covers some things you never though were tax deductible: Watch the Video Here

The video goes on to detail how you should write off the cost of your home office, how criminals are encouraged to write-off their "business expenses", and just how exotic dancer "Chesty Love" was able to write off her breast augmentation.

For more tax deduction ideas, check out:

- Get The Most From Your Business Tax Deductions

- How to Cheat on Your Taxes- Legally

- Answering Your Top Tax Time Questions

- Top 5 Ways to Save on 2010 Tax Filings

- New Tax Breaks and What They Mean for You