Month: December 2021

Important Information About Charitable Giving This Year

For many nonprofits and taxpayers alike, Giving Tuesday is the start of the charitable giving season. While most organizations are legitimate, taxpayers should always research charities before donating. It is also a good idea to understand the expanded tax benefits of giving to causes that mean something to you personally. Taxpayers should also know that they may be able to deduct donations to tax-exempt organizations on their tax returns.

The first step when deciding where to make donations is to visit IRS.gov and use the Tax Exempt Organization Search tool to search for information about an organization’s federal tax status and filings. Here are several facts about this valuable tool that taxpayers should be aware of:

  • Donors can use it to confirm an organization is tax-exempt and eligible to receive tax-deductible charitable contributions.
  • Users can find out if an organization had its tax-exempt status revoked. A common reason for revocation is when an organization does not file its Form 990-series return for three consecutive years.
  • TEOS does not list certain organizations that may be eligible to receive tax-deductible donations, including churches, organizations in a group ruling, and governmental entities.
  • Organizations are listed under the legal name or a “doing business as” name on file with the IRS. No separate listing of common or popular names is searchable.

Taxpayers can also use the interactive tax assistant, Can I Deduct my Charitable Contributions? to help them determine whether a charitable contribution is deductible. As a reminder, taxpayers should get a written acknowledgment for any charitable contributions of $250 or more.

Expanded Tax Benefits in 2021

Tax law now permits taxpayers to claim a limited deduction on their 2021 federal income tax returns for cash contributions they made to certain qualifying charitable organizations even if they don’t itemize their deductions. Taxpayers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions to qualifying charities during 2021. The maximum deduction is $600 for married individuals filing joint returns.

Qualified Charitable Distributions

Taxpayers age 70 1/2 or older can make a qualified charitable distribution, up to $100,000, directly from their IRA, other than a SEP or SIMPLE IRA, to a qualified charitable organization. It’s generally a nontaxable distribution made by the IRA trustee directly to a charitable organization. It is important to note that a qualifying deduction may also count toward the taxpayer’s required minimum distribution requirement for the year. Please call for more information.

Cash Donations

Most cash donations made to charity qualify for the deduction. Cash contributions include those made by check, credit card, or debit card, as well as unreimbursed out-of-pocket expenses in connection with volunteer services to a qualifying charitable organization. Cash contributions don’t include the value of volunteer services, securities, household items, or other property.

There are some exceptions (they also apply to taxpayers who itemize their deductions), however. Cash contributions that are not tax-deductible include those:

  • Made to a supporting organization
  • Intended to help establish or maintain a donor-advised fund
  • carried forward from prior years
  • Made to most private foundations
  • Made to charitable remainder trusts

Questions about charitable giving this tear? Don’t hesitate to contact the office.

Highlights of the Infrastructure Investment and Jobs Act

While the recently passed Infrastructure Investment and Jobs Act primarily addresses infrastructure-related issues, it includes several tax provisions affecting individuals and small business taxpayers. Let’s look:

Individuals

Cryptocurrency Reporting. Cryptocurrency reporting requirements are expanded to stem underreporting of cryptocurrency transactions. However, some have raised concerns that the reporting requirements of this tax provision are so broad that they apply to people who generate cryptocurrency and to people who do not have the information needed to comply with the reporting requirements.

Disaster Relief. The legislation extends certain tax deadlines for taxpayers affected by federally declared disasters. Also amended is the definition of a disaster area.

Tax Deadlines. The types of tax deadlines that are extended due to service in a combat zone are expanded.

Businesses

Employee Retention Credit. The Infrastructure Investment and Jobs Act legislation eliminates the credit for wages paid after September 30, 2021. Previously, however, The American Rescue Plan Act of 2021 extended the Employee Retention Credit to December 31, 2021. As such, there is some concern about the retroactive application of eliminating the credit since the legislation was not passed until after the start of the fourth quarter (i.e., December 1, 2021).

Employer-sponsored Retirement Plans. The relaxation of minimum funding requirements for employer-sponsored retirement plans is further extended, adding to tax revenue projections as funding requirements are decreased.

Contributions to Water and Sewer Utilities. Restoration of an exclusion for contributions to a regulated public utility for water or sewer construction.

Private Activity Bonds. The authorized private activity bond uses are expanded to include qualified broadband projects and qualified carbon dioxide capture facilities

Excise Taxes. Excise taxes on fuels, retail sales of heavy trucks and trailers, and tires are expanded. Superfund excise taxes have been restored.

If you have any questions about these and other tax provisions, please contact the office.