The Latest Rules on Charitable Donations

5 guidelines.

By Barry J. Friedman, CPA
IndustryNewsletters

Charitable contributions are deductible, says the IRS, only if you itemize deductions.

MORE: Beware the Taxes of Self-Employment | 6 Key Facts About Excise Taxes | Gifts to Charity: 6 Facts about Written Acknowledgments | Yes, Home Equity Loans May Still Be Deductible | Social Security Hike the Largest in 7 Years | How to Talk to Clients about ‘Basis’ | Basis: Turning a Common Client Question into New Business | The W-4 Time-Bomb and What To Do About It
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But how do your clients know that the charity they are donating to is qualified?
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Medical and Dental Expenses: What Can You Deduct?

Man taking medication from caretakerInsurance premiums can be deducted ... in part.

By Barry J. Friedman, CPA
IndustryNewsletters

Can your clients deduct medical and dental expenses? That's a complicated question.

MORE: Beware the Taxes of Self-Employment | 6 Key Facts About Excise Taxes | Gifts to Charity: 6 Facts about Written Acknowledgments | Yes, Home Equity Loans May Still Be Deductible | Social Security Hike the Largest in 7 Years | Basis: Turning a Common Client Question into New Business
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To start with, their deductions must exceed 7.5 percent of their adjusted gross income. And they have to fall into an IRS-approved category.
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Beware the Taxes of Self-Employment

Senior executive in home office with two monitors and keyboard on leather desk and looking at paperwork on deskThat 15.3% is likely to be a stunner.

By Barry J. Friedman, CPA
IndustryNewsletters

Your clients are self-employed if they're in business for themselves – including a part-time business. That means they're also their own tax manager!

MORE: 6 Key Facts About Excise Taxes | How Clients Should Gather Their Papers for Taxes | The Latest Fraud Problem: Synthetic Identities | How to Challenge Property Taxes | Real Estate, IRAs & Clients | Percentage-Withholding for Clients | Bitcoin: What Clients Need to Know
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Your clients can be self-employed as a sole proprietor/an independent contractor, or a member of a partnership or of a limited liability company. As such, they need to file an annual income tax return and pay estimated taxes throughout the year on their income.
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6 Key Facts About Excise Taxes

Unexpected reasons the government wants more money.

By Barry J. Friedman, CPA
IndustryNewsletters

Everyone knows about income taxes and sales taxes, but we tend to forget about excise taxes, because they're not obvious.

MORE: How Clients Should Gather Their Papers for Taxes | Charitable Giving under TCJA | Why Padding Tax Deductions Is a Risky Proposition | Portability: Sharing the Estate Tax Exemption | Tariffs: What Clients Need to Know Now
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Excise taxes are paid when purchases are made on specific goods or activities, such as wagering or highway usage by trucks. The producers or merchants pay the tax and typically include the additional tax in the price to the end consumer.
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How Clients Should Gather Their Papers for Taxes

Woman holding paper at deskThey don't have to eat the rhino all in one bite.

By Barry J. Friedman, CPA
IndustryNewsletters

Don't let your clients find themselves frantically searching for information they need to file their tax returns at the last minute. Help them reduce filing difficulties and possibly their tax bills by knowing what documents to have at your fingertips.

MORE: Charitable Giving under TCJA | Gifts to Charity: 6 Facts about Written Acknowledgments | Yes, Home Equity Loans May Still Be Deductible | How to Talk to Clients about ‘Basis’
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Most of the papers they need to document the income, interest and withheld taxes they report arrive in your mailbox in January, with investment-related 1099s often coming in February. They can get ready for that arrival by creating print and online folders. It's a good idea to create a paper and an email tax folder for messages relating directly to tax information.
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Charitable Giving under TCJA

Donor-advised funds can be a simpler option.

By Barry J. Friedman, CPA
IndustryNewsletters

The new tax law nearly doubles the standard deduction for individuals and families, simplifying the filing process for millions of Americans, but complicating giving strategies for many who have made a habit of deducting their charitable contributions.

MORE: The Latest Fraud Problem: Synthetic Identities | Why Padding Tax Deductions Is a Risky Proposition | Portability: Sharing the Estate Tax Exemption | Tariffs: What Clients Need to Know Now
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Indeed, an estimate from the Washington, D.C., Tax Policy Center is that the number of itemizers will drop from 46 million to 13 million. That means most taxpayers will have little tax incentive to donate cash or stock to charity, reducing giving by $13 billion to $20 billion a year.
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Gifts to Charity: 6 Facts about Written Acknowledgments

And of course, make sure the deduction is qualified.

By Barry J. Friedman, CPA
IndustryNewsletters

If your clients offer gifts or money to qualified organizations eligible to receive tax-deductible charitable contributions, they must do two things:

MORE: The Latest Fraud Problem: Synthetic Identities | Why Padding Tax Deductions Is a Risky Proposition | Portability: Sharing the Estate Tax Exemption | Tariffs: What Clients Need to Know Now | Basis: Turning a Common Client Question into New Business | The W-4 Time-Bomb and What To Do About It
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  1. Have a bank record or written communication from the charity for any monetary contributions.
  2. Get a written acknowledgment from the charity for any single donation of $250 or more.

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The Latest Fraud Problem: Synthetic Identities

BONUS: 5 steps for prevention.

By Barry J. Friedman, CPA
IndustryNewsletters

By combining some factual stolen information with completely fake information, thieves convince banks and credit monitoring companies that a fake identity is real. The "bad guy" is not pretending to be the person whose information was stolen or acquired; rather, the data is being used to create a brand-new identity. Thus, the phrase "synthetic identity theft" is born.

MORE: Why Padding Tax Deductions Is a Risky Proposition | Yes, Home Equity Loans May Still Be Deductible | Social Security Hike the Largest in 7 Years
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But how do these scams work?

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Why Padding Tax Deductions Is a Risky Proposition

Some client education may be in order.

By Barry J. Friedman, CPA
IndustryNewsletters

"In this world, nothing can be said to be certain, except death and taxes" is a quote often attributed to Benjamin Franklin. With that in mind, it's best to be prepared, at least financially, for taxes and tax season each year.

MORE: Yes, Home Equity Loans May Still Be Deductible | How to Challenge Property Taxes | Real Estate, IRAs & Clients | Percentage-Withholding for Clients | Bitcoin: What Clients Need to Know | Supreme Court Wayfair Ruling Sows Confusion – And Opportunity
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The Risks

When it comes to deductions, things can get a little sticky. Some clients may wonder what the harm is in taking a little extra here or a little extra there.
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Yes, Home Equity Loans May Still Be Deductible

But watch out for the lower dollar limit.

By Barry J. Friedman, CPA
IndustryNewsletters

Contrary to early reports, the Tax Cuts and Jobs Act allows taxpayers who buy, build or substantially improve their homes using either a home equity loan, home equity lines of credit (HELOC) or second mortgages to deduct interest on the loans.

MORE: How to Challenge Property Taxes | Portability: Sharing the Estate Tax Exemption | Tariffs: What Clients Need to Know Now | New SALT Deduction Limit: What Clients Need to Know | Passwords: How to Beat the Hackers
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That's the good news. But if clients take out the loan to pay for personal living expenses – credit card debt, for instance – they can't deduct the interest from their taxes.
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How to Challenge Property Taxes

5 steps for homeowners.

By Barry J. Friedman, CPA
IndustryNewsletters

Have your clients' property tax bills increased significantly? Do you think they may have grounds for an appeal, particularly if the increase seems out of line with overall appreciation in their area?

MORE: Social Security Hike the Largest in 7 Years | Real Estate, IRAs & Clients | Percentage-Withholding for Clients | Bitcoin: What Clients Need to Know | Supreme Court Wayfair Ruling Sows Confusion – And Opportunity
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Property tax rules and policies are local, but in general, homeowners have 90 days after receiving a new assessment to appeal in most jurisdictions; some close the appeals window after 30 days.

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Portability: Sharing the Estate Tax Exemption

6 key points.

By Barry J. Friedman, CPA
IndustryNewsletters

Portability is actually a simple concept. It means that if one half of a married couple doesn't use up the entirety of the federal estate tax exemption at death, the surviving spouse can use this leftover portion, plus his or her own exemption.

MORE: Real Estate, IRAs & Clients | Tariffs: What Clients Need to Know Now | New SALT Deduction Limit: What Clients Need to Know | Passwords: How to Beat the Hackers
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It makes a high federal estate tax bill less likely. This provision has changed the way estate planning can be approached today.
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Social Security Hike the Largest in 7 Years

Older man using laptop at homeDisability thresholds also are changing.

By Barry J. Friedman, CPA
IndustryNewsletters

As is usual this time of year, the Social Security Administration has published critical information on benefit changes and maximum taxable income.

MORE: Real Estate, IRAs & Clients | Tariffs: What Clients Need to Know Now | New SALT Deduction Limit: What Clients Need to Know | Passwords: How to Beat the Hackers | The W-4 Time-Bomb and What To Do About It  | Supreme Court Wayfair Ruling Sows Confusion – And Opportunity
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How will these affect your clients?
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