A survey of big employers finds they expect their health-care costs to rise nearly 9% next year and plan to share some of that burden with employees via higher premiums and higher out-of-pocket limits.

The survey included responses from 72 members of the nonprofit National Business Group on Health, which represents large companies such as General Electric, Microsoft and General Motors. It parallels pretty closely another survey on employer health-care costs, by PricewaterhouseCoopers, that we reported on a few months back.

Some tidbits from the report, which you can find on the company’s website:

For he rest of this story, go to Big Employers Estimate Health-Care Costs Will Rise 8.9% in 2011

By Bloomberg News

July 28, 2010

The package arrived at Cindy Lohman’s home in Great Mills, Maryland, just two weeks after she learned that her son, Ryan, a 24-year-old Army sergeant, had been killed by a bomb in Afghanistan. It was a thick, 9-inch-by- 12-inch envelope from Prudential Financial Inc., which handles life insurance for the Department of Veterans Affairs.

Inside was a letter from Prudential about Ryan’s $400,000 policy. And there was something else, which looked like a checkbook. The letter told Lohman that the full amount of her payout would be placed in a convenient interest-bearing account, allowing her time to decide how to use the benefit.

“You can hold the money in the account for safekeeping for as long as you like,” the letter said. In tiny print, in a disclaimer that Lohman says she didn’t notice, Prudential disclosed that what it called its Alliance Account was not guaranteed by the Federal Deposit Insurance Corp., Bloomberg Markets magazine reports in its September issue.

Lohman, 52, left the money untouched for six months after her son’s August 2008 death.

“It’s like you’re paying me off because my child was killed,” she says. “It was a consolation prize that I didn’t want.”

As time went on, she says, she tried to use one of the “checks” to buy a bed, and the salesman rejected it. That happened again this year, she says, when she went to a Target store to purchase a camera on Armed Forces Day, May 15.

‘I’m Shocked’

Lohman, a public health nurse who helps special-needs children, says she had always believed that her son’s life insurance funds were in a bank insured by the FDIC. That money — like $28 billion in 1 million death-benefit accounts managed by insurers — wasn’t actually sitting in a bank.

It was being held in Prudential’s general corporate account, earning investment income for the insurer. Prudential paid survivors like Lohman 1 percent interest in 2008 on their Alliance Accounts, while it earned a 4.8 percent return on its corporate funds, according to regulatory filings.

“I’m shocked,” says Lohman, breaking into tears as she learns how the Alliance Account works. “It’s a betrayal. It saddens me as an American that a company would stoop so low as to make a profit on the death of a soldier. Is there anything lower than that?”

Millions of bereaved Americans have unwittingly been placed in the same position by their insurance companies. The practice of issuing what they call “checkbooks” to survivors, instead of paying them lump sums, extends well beyond the military.

For the rest of this story go to Fallen soldier’s families denied cash as insurers profit

By SCOTT GOTTLIEB – Wall Street Journal

President Obama guaranteed Americans that after health reform became law they could keep their insurance plans and their doctors. It’s clear that this promise cannot be kept. Insurers and physicians are already reshaping their businesses as a result of Mr. Obama’s plan.

The health-reform law caps how much insurers can spend on expenses and take for profits. Starting next year, health plans will have a regulated “floor” on their medical-loss ratios, which is the amount of revenue they spend on medical claims. Insurers can only spend 20% of their premiums on running their plans if they offer policies directly to consumers or to small employers. The spending cap is 15% for policies sold to large employers.

This regulation is going to have its biggest impact on insurance sold directly to consumers—what’s referred to as the “individual market.” These policies cost more to market. They also have higher medical costs, owing partly to selection by less healthy consumers.

Finally, individual policies have high start-up costs. If insurers cannot spend more of their revenue getting plans on track, fewer new policies will be offered. No, You Can’t Keep Your Health Plan
Insurers and doctors are already consolidating their businesses in the wake of ObamaCare’s passage.

For the rest of this story, go to No, You Can’t Keep Your Health Plan.

I am curious about your thoughts. After reading this article, would you stop back at the comments section and answer this question? “Should Congress repeal the Obama Health Care Plan and create a new one?”

NEW YORK (CNNMoney.com) — An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork.

Section 9006 of the health care bill — just a few lines buried in the 2,409-page document — mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year.

Right now, the IRS Form 1099 is used to document income for individual workers other than wages and salaries. Freelancers receive them each year from their clients, and businesses issue them to the independent contractors they hire.

But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they’ll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.

The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations.

For the rest of this story please go to Health care law’s massive, hidden tax change

Since the Jobs and Growth Tax Relief Reconciliation Act of 2003 (Pub. L. No. 108-27), the maximum dividend and capital gains tax rates have been linked together at 15 percent. Unless Congress acts in the coming months, the capital gains tax rate will return to its pre-2003 level of 20 percent in 2011 and dividends will again be taxed at ordinary income tax rates of up to 39.6 percent.

When combined with the 3.8 percent surtax created in the Health Care and Education Reconciliation Act of 2010 (Pub. L. No. 111-152), the effective top tax rate on dividends would rise to 43.4 percent in 2013.

For the rest of this article, go to Senate Budget Raises Questions if Dividends Rates Will Top 40 Percent

How To Not Get Audited By The IRS

With increased computer power and more money for staff from the Obama administration, the IRS is gearing up to intensify its audits of individual taxpayers. High income alone is far from the only factor triggering an audit: Last year only 6.4% of the nation’s 440,000 highest-income filers were audited.

That means there are steps you can take–or in some cases, not take–to minimize the chance of getting audited. Many of the precautions revolve around the wisdom of that old Japanese proverb, “The raised nail gets hammered down.” The less attention you can draw, the less likely you are to get audited.

For the rest of this story, go to Forbes and read, How to Not Get Audited by the IRS.

April 1, 2010

by Bob Veres

Economic forecasters sometimes describe the investment markets as a leading indicator, which means that they believe returns can anticipate good or bad economic news.  Share prices fall when investors expect a recession, and rise when a recovery is expected–and last year’s stock market growth seems to fit that pattern.  The market rose last year harder and faster than anybody expected, and so too, later, did the U.S. economy.  On March 26, the U.S. Bureau of Economic Analysis reported that the U.S. gross domestic product increased at an annual rate of 5.6% in the fourth quarter of 2009, after a 2.2% increase in the third quarter.

Nobody knows how we, the community of investors, could have known, during the darkest hours of March 2009, that better economic times were around the corner.

The U.S. equity markets were generally higher across the board in the first quarter of 2010, which is a terrific contrast with where we were at this time last year.  Indeed, CNNMoney.com reported yesterday that the returns for the first three months of this year ranked among the best first quarter performances in more than a decade.

Wilshire Associates reports that the Wilshire 5000 total market index, the broadest indicator of U.S. stocks, was up 6.42% in the first quarter of this year.  Most of the action came in the month just ended.  The Wilshire index was actually slightly down for January and February, but March produced a 6.61% rise in the index.  The Russell 3000 index, another broad measure of U.S. stock returns, rose 5.94% for the first quarter of 2010, bolstered by a 6.30% return in March.

Wilshire’s U.S. large cap index rose 5.95% for the quarter, aided somewhat by a 6.36% return in March.  The Russell 1000 index rose 5.70% after gaining 6.14% in March.  The S&P 500 rose 4.9% for the quarter.

Wilshire’s Mid-Cap index was up 9.11% for the quarter; the Russell Midcap rose 8.67%.

Wilshire’s Small Cap 250 rose 9.00% in the first three months of the year, and the Russell 2000 returned 8.85% over the same period.

There are times when value stocks outpace growth and vice versa, but the results for this quarter were mixed, as, in fact, they were for most of last year.  The growth stocks in Wilshire’s large cap index were up 5.20% vs. 6.69% for value; Russell’s index data shows large cap growth gaining 4.65% vs. 6.78% for value.  Wilshire’s Mid-Cap showed 8.84% quarterly returns for growth and 7.90% for value; Russell’s numbers were 7.67% and 9.61% respectively.  Wilshire’s Small Cap Growth was up 8.97% while Small Cap Value offered the highest quarterly return at 11.80%.  Russell offered comparable figures: 7.61% for growth, 10.02% for value.  A generally rising tide–and signs of an improving economy–seems to have floated all boats.

All was not quite as positive on the international front, where stock returns of different countries seemed to be everywhere.  Alas, we missed the strong stock market rally in Estonia (up 44.7% through 3/25/10, according to the EmergInvest web site) and the 26% runup in Kenyan stocks in the first quarter.  But we also cleverly avoided the 32.2% drop in the Bermuda stock market in the first quarter (through 3/30).  Among the surprises: China’s A Shares Index dropped 2.6% while Japan was up 6.3% in the first three months of the year.

The EAFE index, the broadest measure of developing nations, reported a relatively calm-looking year-to-date return of 0.22% on the MSCI/Barra web site, and the Far East index was up a robust 6.29% for the quarter.  Emerging markets were up 2.11%.  Meanwhile, government deficit troubles in Greece, Spain and Ireland, and to a lesser extent in Italy cast a shadow over the European economies.  European stocks in the MSCI index were down 2.33% for the quarter.

All of these returns are in dollar terms, and it bears remembering that, due to the debt crises across Europe, the euro fell 6.23% vs. the dollar in the first three months of 2010–which means that in euro terms, to investors in Germany or France, the European markets are up nearly 4% so far this year.  If the euro strengthens against the dollar at some point in the future, foreign stock returns will be boosted accordingly.

Real estate continued a recovery that began in 2009 after two very difficult years.  The FTSE NAREIT Index, which is compiled by the National Association of Real Estate Investment Trusts, experienced a total return drop of 17.83% in 2007 and fell another 37.34% the following year.  But in 2009, the broad real estate index rose 27.45%, and recorded a 10.60% total return in the first quarter of this year.

Even bonds offered positive returns.  The Lehman U.S. Aggregate Bond index was up 1.64% for the first three months of 2010, and Treasury bonds started the year on a positive note.  Government bonds of 1-3 year maturity returned 0.93% on yields of 1.04%; 3-7 year Treasuries were up 1.24% for the quarter on yields of 2.52%.  10-20 year Treasuries were up 1.27% on 4.29% yields, while long Treasuries of more than 20 year maturities declined 0.51% on yields of 4.73%.

Commodities, as measured by the Dow Jones-UBS Commodity Index, were down 5.05% in the first quarter, but once again this overall trend masks a lot of varying performances.  Crude oil was up 3.44% for the quarter, gold was up 1.43%, but corn prices were down 19.43%.

Nobody knows whether this sunny investment climate will continue, or whether the strong market returns over the past 12 months will give way to a new bear market. However, one indicator suggests that we may not be walking blindly into another frightening meltdown like the one we all experienced in 2008 and the first two months of 2009.  The Chicago Board of Options Exchange measures volatility in the stock market by its VIX index–which is more precisely an expectation of volatility and risk over the next 30-day period, and is sometimes called Wall Street’s “fear gauge.”  On November 20, 2008, the VIX index hit a ten-year high of 80.86, according to data compiled by the IMCA-RC web site.  On March 23, 2010, the VIX index closing price stood at a more historically normal level of 16.35.

Thanks to a positive uptrend in March, this quarter’s market returns represent one of those unusual periods when just about everything went up.  Just a year ago, people were talking about the collapse of civilization, and six months ago there were worries that the economic stimulus package would not be enough to get the U.S. economy moving again–that the country was headed for a double-dip recession.

The economy won’t be fully recovered until jobs come back, and the recent stock market rises haven’t yet taken us back up to the levels before the Great Recession swept through like a hurricane.  But people who were nervously sitting on the sidelines over the past year, and the past quarter, missed out a nice rally.  Let’s hope it continues.

First quarter returns are higher than most others this decade: http://money.cnn.com/2010/03/31/markets/thebuzz/index.htm

Economic growth rate: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Wilshire Indices: http://www.wilshire.com/Indexes/calculator/

Russell index data: http://www.russell.com/indexes/data/daily_total_returns_us.asp

Bond returns: http://www.lehman.com/indices/dailyreturn.html

International indices: http://www.mscibarra.com/products/indices/international_equity_indices/performance.html

Dollar’s rise and fall: http://www.fxstreet.com/rates-charts/

VIX data: http://www.icmarc.org/xp/rc/marketview/chart/2010/

Global Stock Market index returns: http://www.emerginvest.com/WorldStockMarkets/Countries.html

NAREIT (Real Estate) data: http://www.reit.com/IndustryDataPerformance/FTSENAREITUSRealEstateIndexDailyReturn/tabid/77/Default.aspx

Commodities data: http://www.djindexes.com/ubs/?go=index-data

Unemployment data:  http://money.cnn.com/2010/03/31/news/economy/ADP_private_sector_payrolls/index.htm?postversion=2010033109

Periodically the IRS updates its “Dirty Dozen” list of things to watch out for. This post is taken directly from the IRS website.

March 16, 2010

WASHINGTON — The Internal Revenue Service today issued its 2010 “dirty dozen” list of tax scams, including schemes involving return preparer fraud, hiding income offshore and phishing.

“Taxpayers should be wary of anyone peddling scams that seem too good to be true,” IRS Commissioner Doug Shulman said. “The IRS fights fraud by pursuing taxpayers who hide income abroad and by ensuring taxpayers get competent, ethical service from qualified professionals at home in the U.S.”

Tax schemes are illegal and can lead to imprisonment and fines for both scam artists and taxpayers. Taxpayers pulled into these schemes must repay unpaid taxes plus interest and penalties. The IRS pursues and shuts down promoters of these and numerous other scams.

The IRS urges taxpayers to avoid these common schemes:

Return Preparer Fraud

Dishonest return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds, charging inflated fees for return preparation services and attracting new clients by promising refunds that are too good to be true. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued injunctions ordering hundreds of individuals to cease preparing returns and promoting fraud, and the Department of Justice has filed complaints against dozens of others, which are pending in court.

To increase confidence in the tax system and improve compliance with the tax law, the IRS is implementing a number of steps for future filing seasons. These include a requirement that all paid tax return preparers register with the IRS and obtain a preparer tax identification number (PTIN), as well as both competency tests and ongoing continuing professional education for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents.

Setting higher standards for the tax preparer community will significantly enhance protections and services for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term. Other measures the IRS anticipates taking are highlighted in the IRS Return Preparer Review issued in December 2009.

Hiding Income Offshore

The IRS aggressively pursues taxpayers involved in abusive offshore transactions as well as the promoters, professionals and others who facilitate or enable these schemes. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts or through the use of nominee entities. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or insurance plans.

IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from over 14,700 voluntary disclosures received last year. While special civil-penalty provisions for those with undisclosed offshore accounts expired in 2009, the IRS continues to urge taxpayers with offshore accounts or entities to voluntarily come forward and resolve their tax matters. By making a voluntary disclosure, taxpayers may mitigate their risk of criminal prosecution.

Phishing

Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information online. IRS impersonation schemes flourish during the filing season and can take the form of e-mails, tweets or phony Web sites. Scammers may also use phones and faxes to reach their victims.

Scam artists will try to mislead consumers by telling them they are entitled to a tax refund from the IRS and that they must reveal personal information to claim it. Criminals use the information they get to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.

Taxpayers who receive suspicious e-mails claiming to come from the IRS should not open any attachments or click on any of the links in the e-mail. Suspicious e-mails claiming to be from the IRS or Web addresses that do not begin with http://www.irs.gov should be forwarded to the IRS mailbox: phishing@irs.gov.

Filing False or Misleading Forms

The IRS is seeing various instances where scam artists file false or misleading returns to claim refunds that they are not entitled to. Under the scheme, taxpayers fabricate an information return and falsely claim the corresponding amount as withholding as a way to seek a tax refund. Phony information returns, such as a Form 1099 Original Issue Discount (OID), claiming false withholding credits usually are used to legitimize erroneous refund claims. One version of the scheme is based on a false theory that the federal government maintains secret accounts for its citizens, and that taxpayers can gain access to funds in those accounts by issuing 1099-OID forms to their creditors, including the IRS.

Nontaxable Social Security Benefits with Exaggerated Withholding Credit

The IRS has identified returns where taxpayers report nontaxable Social Security Benefits with excessive withholding. This tactic results in no income reported to the IRS on the tax return. Often both the withholding amount and the reported income are incorrect. Taxpayers should avoid making these mistakes. Filings of this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions

The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. The IRS also continues to investigate various schemes involving the donation of non-cash assets including situations where several organizations claim the full value for both the receipt and distribution of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions.

Frivolous Arguments

Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or IRS guidance.

Abusive Retirement Plans

The IRS continues to find abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers use to avoid the limits on contributions to IRAs, as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets at less than fair market value into IRAs or companies owned by their IRAs to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity that is considered prohibited.

Disguised Corporate Ownership

Corporations and other entities are formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity by means such as improperly using a third party to request an employer identification number.
Such entities can be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance with the law.

Zero Wages

Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme. Filings of this type of return may result in a $5,000 penalty.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts.  While there are many legitimate, valid uses of trusts in tax and estate planning, some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means to avoid income tax liability and to hide assets from creditors, including the IRS.

The IRS has recently seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust arrangement.

Fuel Tax Credit Scams

The IRS receives claims for the fuel tax credit that are excessive. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But other individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and potentially subjects those who improperly claim the credit to a $5,000 penalty.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.

Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

You can find this page on the IRS website

Forbes magazine reports on a collosal failure at Wal-Mart to put their employees first in the administration of their 401(k) plan. Who is the big winner? Merrill Lynch, who else? This is how Wall Street works. I hope this is a wake up call to many Americans who are being fleeced by the likes of Merrill Lynch in their retirement plans. I encourage you to take a good look at your plan, find out how much is being paid from your assets compared to what you could get it for – if employee benefit is on the top of the list rather than broker benefit.

For the whole Forbes story go to Wal-Mart 401(k) Pays Retail

IR-2009-114, Dec. 8, 2009

WASHINGTON — Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years.

Some of these changes include the following:

Special Charitable Contributions for Certain IRA Owners

This provision, currently scheduled to expire at the end of 2009, offers older owners of individual retirement accounts (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity. This option, created in 2006, is available for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.

To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the transfer.

Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.

Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions. See Publication 590, Individual Retirement Arrangements (IRAs), for more information on qualified charitable distributions.

Rules for Clothing and Household Items

To be deductible, clothing and household items donated to charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances and linens.

Guidelines for Monetary Donations

To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.

Reminders

To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders: Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2009 count for 2009. This is true even if the credit card bill isn’t paid until 2010. Also, checks count for 2009 as long as they are mailed in 2009 and clear, shortly thereafter.

• Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.

• For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2009 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.

• For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.

• The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

• If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

For additional information on charitable giving:

* Charities & Non-Profits
* Publication 526, Charitable Contributions.
* On-line mini-course, Can I Deduct My Charitable Contributions?