Charitable Deductions

Charitable giving can be a great way to help the less fortunate as well as save on your taxes. The first rule of charitable tax deductions is that your donation must go to a legitimate and government qualified organization. Charitable organizations must file an application with the IRS in order to be qualified. The IRS website
has an useful online search tool for finding qualified charities.

If you have already donated your time, money, or services to a charitable organization and are interested in filing for a charitable deduction, the first step is to turn your attention to the tax form 1040. You should itemize your deductions on Schedule A of that form.

If your charitable donation is a purchase, such as a ticket to an event or memorabilia item, you should deduct the market value of your ticket from the total amount of your donation. For example, if you purchase a ticket to a charitable dinner for $100, of which the market value of the dinner is only $60, you are permitted to claim only $40 of that donation. "Fair market value" can be defined as the price at which the item would exchanged at by a willing and fully aware buyer and seller. You cannot claim a deduction on any item you derive financial benefit from.

In addition, if you wish to claim a deduction in excess of $250, you must have bank statements, a written acknowledgment of your donation from a qualified organization, or other financial documentation. You will not be allowed to claim a deduction without the proper documentation.

Below are some other circumstances in which you can claim charitable deductions.

- You may be able to deduct your expenses if you have a foreign student living with you through a qualified organization.
- You may be able to deduct your expenses for uniforms if the charity or volunteer organization you donate your time to requires them.
- You may be able to deduct the cost of your gas and oil if you directly use your car while in commission for a charitable organization.

Enjoy your charitable giving!

Tax Scams You Should Avoid

We are all familiar with the old adage, "There are only two things in life that are guaranteed: death and taxes." While every citizen files taxes each year, some of us are more familiar with the process than others. Accurately and correctly filing taxes is important and mistakes, even innocent ones, can lead to anxiety-inducing audits and monetary fees. Below I have complied some of the more common "Tax Scams" that you should be avoid while filing your taxes.

1. Frivolous arguments: It is a common misconception that you can get gain hundreds of dollars on your tax refund by filing for loopholes and tax liabilities. The IRS has an entire page on their website dedicated to "frivolous tax arguments" that should be avoided completely when filing. You can get the maximum amount of money back on your taxes without making exaggerated claims. Furthermore,  filing frivolous claims can result in a $5,000 penalty from the IRS. 

2. Income Tax Schemes: Abusive tax structures are essentially plans to avoid paying the taxes you legally owe by concealing your true financial situation. This is primarily achieved by trying to disguise your ownership of expensive assets by using shell companies or foreign financial accounts. If you become involved in an income tax scheme and are caught by the IRS, you can face severe penalties. 

NB: It is important to remember that ignorance of the law is never a valid legal defense. If you are ever convicted of a tax-related crime, it will not work to plead ignorance that your actions were illegal as your defense. That is why it is important to work with reputable professions who can ensure that

3. Misusing trusts: Trusts have useful and valid legal benefits, but they can also be abused. Consult with a lawyer and/or tax professional before you commit any assets into a trust. 

Keep Your Valuables Safe: Protecting Yourself From Natural Disaster

This is an reminder of the importance of keeping all of your important financial documents safe in case of a natural disaster or other such emergency.

1. Scan your records so that they're electronic
It is simple to scan all important documents (tax records, bank statements, insurance policies, etc) onto your computer and then save them in the manner on your choice. Some good options would be an external hard drive or send to a specific gmail account.

2. Buy a safe and store important documents in it
If you're simply not the computer savvy type and don't want to scan your financial documents, consider storing them in a safe.

2. Get out that camera and document your valuables
You should take photos of your most valuable items. This will allow you to have physical proof of your items, their condition and their worth when you claim the loss with your insurance. These photos may also be useful if you wish to claim the loss of your items as a deduction on your tax return.

3. Have an emergency plan
In the event of an emergency, the best thing you can do is have a plan (and a back up plan) for you and your family. In situations like these, preparation truly does save lives. Make sure you and your family have a separate plan for a variety of different emergency situations, such as earthquakes, floods, and tornadoes. It can also be helpful to rehearse this plan together as a family so that you can identify problems areas and familiarize each family member with the routine. If you are having a trouble forming a comprehensive plan on your own, this PSA guide can help.

Protect Yourself Financially Before You File for Divorce

Divorce often puts people on a shaky financial ground. The prospect of splitting of assets can be scary and fraught with complications. So what can you do to make sure you'll be protected financially when you decide to divorce? Below are some tips to help you prepare.

1) Review your financial documents.

Now is the time to get all of your financial documents together. Firstly, you will need most of these documents when you go to Court anyway. Secondly, it is important to have an up-to-date picture of your financial situation. You should carefully review and duplicate these papers. You should also request a credit check and review the report carefully. You are entitled to a receive a free credit report once a year. If you will be moving to a new home or apartment, this may be the first time you will have to apply for housing using only your credit score. Remember, knowledge is power!

2) Change accounts into your name.
You may have opened joint bank accounts, credit cards, and/or other loans during the course of your marriage. It is wise to open a bank account with you as the sole account holder so that you have a secure way to store and access money. Additionally, you should close out all joint credit cards at soon as possible, as to avoid your significant other making unapproved charges.

3.) Be mindful of taxes
A divorce will change the way you file for taxes. Make sure you are aware of how the date your divorce is finalized might affect the way you file taxes for this year and the next. You might want to consult a tax attorney if you are unsure about any part of the process.

4) Avoid taking on additional debt
If you are considering filing for divorce, do not take on or cosign any new debt and encourage your spouse to do the same. Remember that any debt either of you takes on during the marriage will be considered joint debt. In this time period you want to be detangling yourself from any joined financial ventures, not taking on new ones. This will only further complicate the divorce process and could result in financial loss on your part.

5.) Update your will and insurance.
You never know when emergency situations will arise, so don't let yourself be caught be surprise. Make sure you update your will, insurance, and any other financial documents to reflect that your spouse is no longer your beneficiary.