Don't Worry be Fooled and Charitable Gifts Off For Nonprofits

Don't worry be fooled by disaster scammers
Americans have always been altruistic, quick to respond to victims' needs and ready to lend a helping hand or much-needed cash.

In response to Hurricane Katrina, the American Red Cross launched the largest mobilization of resources in its history for a single natural disaster. From mobilizing shelters, staff and volunteers, emergency response vehicles and hot meals, snacks and bottled water, the Red

Cross has prepared its relief efforts for storm victims on all fronts.
While the disasters change, from tsunamis, earthquakes, hurricanes, tornadoes and forest fires to terrorist actions, the financial support needed to help others pick up their lives is always the same. Unfortunately, scam artists know this charitable trait well and often are waiting with a con to cheat both givers and recipients.

The schemes come through the mail, via telephone and e-mail and by knocks at the door. While many legitimate organizations, such as the Red Cross and the Salvation Army, collect for well-deserved and Internal Revenue Service-approved causes, you need to be alert to scam artists.
Here's how to make sure your heartfelt donations go to the right cause:
Don't be rushed. Do not feel pressured to make an immediate commitment -- "deadlines" are a characteristic of a scam. Ask the caller or e-mail sender to provide written information on the charity's programs and finances before you make a contribution decision.
Ask questions. Who does this contribution assist? Does your organization intend to meet immediate or long-term needs of those victimized by this tragedy, or both? How much goes to victims? How much goes to administration? Even newly established charities should have written material available describing their programs, anticipated expenditures and how they will carry out activities.

Get it in writing. Always ask for, and wait until you receive, written material about any offer or charity. Remember, telephone con artists are skilled at sounding believable -- even when they're lying. There's no need to rush to a decision.
Verify. Always make an independent verification of the solicitor's identity before sending a contribution. Call or write the organization's headquarters. Contact your local charity registration office (usually an arm of your state's attorney general's office) or the Better Business Bureau's Wise Giving Alliance to confirm.
Hang on to your cash. Do not pay with cash. Use a check and make it out to the organization, not the individual collecting the donation.
Be stingy with personal information. Do not give your credit card account information over the telephone or online. Always check out the organization before giving any personal information. This could be a ruse to obtain the card number for illegitimate purposes.
Call the authorities. If you cannot verify an organization or you are suspicious of the solicitation, contact the police or the FBI.

Charitable gifts pay off for nonprofits and the donor
When preparing your federal tax return, don't forget to count contributions to charitable organizations. Your gifts to others might just give you a smaller IRS bill. In this tax tip: • New hurricane donation deductions • Looser limits for all • The rest of the rules remain • Tallying your tax benefit ! • Extravagant giving

For the second consecutive year, many taxpayers will find their philanthropic gifts larger than normal. Natural disasters in 2004 and 2005 prompted an outpouring of donations. Subsequent tax law revisions could mean added deductions for these filers.
Because of the Asian tsunami in late 2004, taxpayers were able to count some donations they made in January 2005 as deductions on their 2004 returns. If you took advantage of that gift-shifting option and deducted your donation on your previous return, don't try to claim it again this filing season or you'll likely hear from the IRS.
If, however, you saved the claim for your tsunami donation for this tax season, count it along with any gifts you also made later in the year. And if some of those 2005 donations were to help victims of Hurricane Katrina, you could have even more tax breaks this year.
New hurricane donation deductionsThere are three major Katrina-related philanthropic tax law changes:

First, if you meet specific eligibility requirements, you could claim up to $2,000 in additional exemptions if you had opened up your home to hurricane victims. This amount is limited to claims of $500 per person, and you are only allowed to claim a maximum of four persons that you sheltered. The storm evacuees must have stayed in your home, not some other property you own and arranged for them to use, for 60 days.

You could get a second special tax break if you volunteer transportation services for hurricane relief efforts. Generally, you can deduct your volunteer mileage at a 14-cents-per-mile rate. This is an amount that is set by statute, and cannot be indexed for inflation annually as are other tax mileage rates. However, the new tax law now says for the miles you traveled for Katrina efforts, you can deduct 70 percent of the business mileage allowance.
The one complication: There are two business mile figures. On Sept. 1, the IRS upped the rate, in part because of higher gasoline prices. So for miles driven for a Katrina cause from Aug. 25 (the effective date of the law change) through Aug. 31, you can deduct 29 cents a mile. Mileage on Sept. 1 through Dec. 31 is worth a deduction of 34 cents per mile (the new business rate of 48.5 cents x 70 percent). Remember, too, that these higher rates only apply to driving done directly in connection with a charity's Katrina relief efforts. Any other charitable driving still must be calculated at the 14-cent rate.

Looser limits for allFinally, the amount of goodwill sparked by those in need after Katrina hit prompted lawmakers to suspend during the last part of the year the limits on monetary gifts to charitable organizations.

Generally, you cannot contribute more than 50 percent of your adjusted gross income. That means if your AGI is $30,000 then you can deduct gifts totaling as much as $15,000. Some higher-income donors who usually are the ones able to make gifts up to the 50-percent limit also sometimes find that their total deductions (charitable and all other categories) are reduced, based on their income.

The Katrina tax legislation removes both these restrictions for charitable gifts made between Aug. 28 and Dec. 31. The best part for donors able to give substantial amounts is that the limits are removed for any gift, regardless of the receiving organization's designated cause.

The rest of the rules remainFor charitable donations made before Katrina struck or made to groups that don't qualify for the special hurricane-related changes, the rest of the tax donation rules remain the same.

From a tax standpoint, the key consideration is just how much of a break your donations will produce. The amount depends on how you file your taxes. Charitable contributions only help you at tax-filing time if you itemize deductions. That means you have to keep track of what you give, and file the long Form 1040 and Schedule A.
If you opt instead to take the standard deduction when you file your return, the choice made by most taxpayers, your donations will still help the organizations you give to, but they won't help cut your tax bill. You can't add your donation totals to your standard deduction to increase that amount.

So how do you know whether you should itemize or claim the standard deduction? Start by finding out which standard deduction amount applies to you. It depends on your filing status:
* $5,000 for single taxpayers or married filing separately; * $7,300 for heads of households; and * $10,000 for married couples who file joint returns.
If you have enough deductions -- for example, your donations plus mortgage interest plus real estate taxes -- to exceed the standard amount, it generally makes good tax sense to itemize.
Tallying your tax benefitOK, you've determined that itemizing is the way to go. Now it's time to tally your big-heartedness.

A nice thing about charitable contributions is that, unlike medical or miscellaneous deductions, there is no threshold amount to meet. You can give as little as $5 and still add it to the rest of your itemized deductions. The only limit, as noted earlier in discussing the Katrina tax changes, is on how much you can give. Most taxpayers, however, don't have a problem staying under the deductible giving limit.

You're also not limited to monetary donations. You can give merchandise, appreciated assets, count the miles you drive for a worthy cause, even deduct part of the price of a ticket you purchased to attend a charity event.
But there are still a few IRS rules you must follow to make sure your contributions pay off at filing time.

To be deductible, contributions must be made to qualified organizations. This is especially important when disasters prompt giving; too often, con artists use such tragedies to take your money and give nothing to those suffering. Organizations can tell you if they are qualified and if donations to them are deductible. You also can read the charity's literature to ensure that it is fully recognized by the IRS. For complete peace of mind, check out the agency's online list (Publication 78) of exempt organizations or call the IRS at 1-800-829-1040 and ask about the group's tax status.

If you get anything in return for your donation -- merchandise, goods, services, admission to a charity ball, banquet, theatrical performance or sporting event -- you can deduct only the amount that exceeds the fair market value of the charity's thank-you token or benefit. For example, if you give your local PBS station $100 and get a $25 videotape of a Masterpiece Theater performance in return, you can only deduct $75.

When you give goods instead of cash, it's up to you -- not the IRS, not the charity -- to assign a value to your donation. Of course, the IRS has rules on how you decide what a donated item is worth: Claim its fair-market value, or what a willing buyer would pay for that item in its current shape, not what it was worth when it was new. Bankrate.com has some work sheets that can help you complete this task.

Even though you generally don't have to include substantiation of your gift-giving with your return, it's a good idea to keep a record of your donated goods as well as cash gifts. So when Goodwill asks, "Do you want a receipt?" say "Yes." If they don't offer, ask for one.
Extravagant givingAcknowledgment of your largesse is necessary when your gifts are large. For a contribution of $250 or more, you must get a written receipt of your donation from the qualified organization before you can claim the deduction.

When you donate more than $500 worth of goods to charity, you must include with your tax return Form 8283, Noncash Charitable Contributions, detailing your generosity. Take this deduction amount and forget the form, and the IRS could disallow your claim.
In an even bigger giving mood? If you claim a deduction of more than $5,000 for an item, the IRS wants more than just your word. You must have a qualified appraiser provide the value and then attach an appraisal summary (Section B of Form 8283) to your tax return.
And while Uncle Sam basically views charitable gifts as a good thing, he has his limits.
In some cases, the IRS won't let you claim all your contributions in one tax year. Generally, your donations cannot be more than 50 percent of your adjusted gross income, although in some instances the limit is 20 percent or 30 percent depending on the type of property you donate and the type of organization to which you give it.

You can carry over your excess contributions for up to five more tax years, but your carryover amounts will still be subject to the original adjusted gross income limitation rules. For most donors, these limits don't pose a problem. However, the total of all your Schedule A itemized deductions could be reduced if you make a lot of money ($145,950 for 2005 returns).
More details on charitable contribution tax deductions and possible limitations are found in IRS Publication 526, Charitable Contributions, and Publication 561, Determining the Value of Donated Property.

Freelance writer Kay Bell writes Bankrate's tax stories from her home in Austin, Texas, and blogs on tax topics at Don't Mess with Taxe

source from : bankrate.com