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The holiday tax rush

There are only a few days left to take advantage of donations

POSTED: February 2, 2008 5:02 a.m.

With just a week remaining in 2007, time is ticking away on opportunities for actions which reduce tax liability on your income tax return.\

Barclay Rushton, a Gainesville accountant with the firm Rushton & Co., said taxpayers will find some changes regarding charitable donations.

"Basically, you've got to have a receipt for everything," said Rushton, who said receipts would be needed in the event of an audit by the Internal Revenue Service.

If you're thinking of making a last-minute donation to a charity that accepts discarded clothing, those regulations also have changed.

"The law has changed and you have to have a specific receipt, not just ‘Five bags of clothes,'" Rushton said. "The clothing has to be in good or better condition."

Another popular donation is giving used vehicles to charity. IRS regulations now limit the amount of that deduction.

"The charity has to notify you of the sales price of the vehicle and you are limited on your deduction to that amount, not the book value of the car," he said.

For persons who have significant stock holdings, a gift of stock may have additional tax benefits. "If an individual has appreciated stock, it's always better to donate appreciated stock, rather than cash. They get the full value of the stock and don't have to report the gains," he said.

But with Dec. 31 falling on a Monday, some entities may take New Year's Eve as a holiday. Rushton said it is important that a check is in the mail before the new year.

"Postmarked is adequate, but some churches, for example, must receive the donation by Dec. 31 in order to have it on their records," Rushton said. "As long as you can show you've mailed it by that date, you're OK."

The same is true for tax payments. "If you owe any state taxes, pay it before Dec. 31, so you can deduct it if you itemize your federal return," Rushton said.

One tax break is running out this year, according to an official at Brenau University. James M. Barco, vice president for institutional advancement at the school, said a portion of the Pension Protection Act of 2006 enables individuals who are at least 70« years old to donate up to $100,000 from individual retirement accounts without accruing any tax liabilities or penalties.

However, since Congress has not extended the provision, a "sunset" clause takes effect at the end of the year and the break disappears.

"This is the time of the year when people are giving thanks and counting their blessings and want to do something to help out their favorite charities or not-for-profit institutions," Barco said. "They also need to make certain that their generosity does not cost them extra money in unforeseen taxes."

Such contributions must be made to an organization or institution that is registered with the IRS as a 501(c)3 charity. Contributions must be an outright gift to the organization or institution and cannot be part of a planned giving program, a trust or a donor-advised fund.

For persons facing a significant tax liability, trying to find help in the final week of the year may be too late.

"You're probably going to have hard time finding a CPA or an attorney that has time to handle a new client," Rushton said.

Rushton, like many CPAs, said his phone is busy with questions from clients during the final week of the year. "Time is running out," he said.



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