Tax Change for Donations Sparks Goodwill Reminder

Goodwill Industries is reminding tax preparers that donations of used clothing and household items qualify as tax deductions as long as they are in good condition.

“It used to be that people would keep general records and write something like, ’four boxes of clothing’ on a Goodwill receipt,” says George W. Kessinger, President and CEO of Goodwill Industries International. “Now you must make sure the items are in good condition, and we recommend keeping a specific list of items—but the donations are tax deductible all the same.”

The Pension Protection Act of 2006 specified that donated items must be in “good used condition or better,” but did not define what that means. Goodwill says some tax preparers are erroneously telling taxpayers that they can’t claim a tax deduction anymore.

According to the IRS, non-cash contributions to charities are a big area of abuse, as some taxpayers overvalue the items they give away. Americans donated almost $6 billion dollars worth of clothing alone in 2003, the first year the IRS started tracking non-cash donations reported on Form 8283. In fact, abuse of charitable deductions was listed on its Dirty Dozen Tax Scams. (Read the IRS press release at http://www.irs.gov/newsroom/article/0,,id=167983,00.html)

How can your clients prove that they donated “good condition” items to charity?

MarketWatch offered two suggestions: Take photographs or film all the items. Also, create your own form that says, "These clothing and household items are in good condition, in compliance with IRS rules.” Ask the person receiving the items to sign and date the form.

Another thing to remember: Anyone donating a household item worth more than $500 needs to get a qualified appraisal for it, but only if it's not in good used condition or better, the IRS says. Such items include furniture, electronics, appliances and furnishings.

You may like these other stories...

IRS must take oath on Lerner emails: judgeMackenzie Weinger of Politico reported on Thursday that a federal judge ordered the IRS to explain under oath how it lost emails connected to Lois Lerner, the ex-IRS official at the...
The Republican-controlled House of Representatives passed a bill on Friday morning that would permanently extend the bonus depreciation tax break for businesses.The measure, HR 4718, which was crafted by Representative Pat...
The Republican-led House of Representatives is expected to pass a bill this week that would permanently extend the bonus depreciation tax break. But don’t expect President Obama to sign it.The Obama administration said...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.