Tax Tips

Tax Tips – October 2007

Organization

Getting ready to have your taxes prepared can be a daunting task.  But remember, it can be easy if you organize yourself in an on-going basis.  Create a file or folder for all of your important tax documents.  Use the checklists from our website to remind you of the types of information you should be collecting (mortgage statements, property tax payments, tuition paid, childcare payments, etc.).  Keep an ongoing log of business, medical or charitable mileage.  Schedule an appointment with us mid-year to review your information and to strategize on how to maximize your deductions.

Charitable Contributions

Here are some tips to remember for charitable contributions.  For a complete list follow the link to: http://www.irs.gov/newsroom/article/0,,id=106990,00.html

• Charitable contributions are deductible only if you itemize deductions using Form 1040.
• Contributions must be made to a qualified organization.  Organizations can tell you if they are qualified and if donations to them are deductible.  Most qualified organizations are in the US.  There is an IRS website listing qualified foreign organizations: http://apps.irs.gov/app/pub78
• Used clothing and household items such as furniture, linens and appliances must be in good condition.
• Vehicle donations are subject to special rules.
• To deduct charitable contributions of items valued at $250 or more you must have a written acknowledgment from the qualified organization.
• To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attach the form to your return

401k Rollovers

If you leave an employer (change jobs, layoff, etc.) you will receive a disbursement of your 401k plan.  In most cases, if you do not roll this over, you will pay tax and a 10% penalty on the amount not rolled over.  As an example, if you are in the 25% tax bracket, you will end up paying a total of 35% tax on the amount!  Even if you need the money (e.g. because you are unemployed), you may be better off borrowing the money.  Again, there are many exceptions to the rule, especially as you approach retirement age.  Don’t hesitate to contact us if you have questions on this complicated issue.