Apr 07 2011
By Maria U Bernston, CPA
Its Unavoidable, Tax Season is Upon Us!
For those of you hopelessly procrastinating them, mire in the muck of doing them, or breathing a sigh of relief for completing them – here is some helpful tax information to keep in mind:
Here is what you need to do to get the maximum deduction for your vehicle and “why”:
- Check out the charity to make sure that it is a “qualified” organization – otherwise your donation will not be tax deductible.
- Determine that you qualify for a tax deduction
- Determine the maximum amount of your deduction
- Know the recordkeeping and filing requirements associated with your donation
1. Qualified Organization:
Cars 4 Causes is a 501(c)(3) organization which is qualified to receive tax-deductible contributions.
2. Do You Qualify for a Tax Deduction?
As an individual, you can deduct contributions to charity only if you itemize deductions on Schedule A of Form 1040
There are certain deduction limitations; for example, your total charitable deductions for the year cannot exceed a percentage of your adjusted gross income. Several other limits and exceptions, such as donation deduction for a previously depreciated vehicle, may also apply.
3. How Much Can You Deduct?
The maximum amount you can deduct on your income tax return is the sales price of the vehicle.
4. What Documentation Do You Need to Keep?
Good news – Cars 4 Causes provides all of the following documents, as applicable, in a timely manner. You need to keep them with your tax documents so that you can support your deduction or file them with your tax return, if required.
For donations of less than $250, you will receive a receipt from Cars 4 Causes that includes the charity’s name, date and location of donation and description of the vehicle.
For donations of $250 or more, but not more than $500, you will receive a contemporaneous written acknowledgement from Cars 4 Causes. This acknowledgement includes the same information as above. You must receive the acknowledgement by the due date for filing your returns (including extension) or the date you actually filed your return, if earlier.
For donations greater than $500, you will receive a contemporaneous written acknowledgement (Form 1098-C) that includes the gross proceeds Cars 4 Causes received from the sale of the vehicle. You should read the instructions accompanying the form carefully to make sure you report the donation correctly on your return.
If the deduction you are claiming for a donated car is greater than $500, you must also complete Section A of Form 8283.
5. The Filing deadline is approaching and still no Form 1098-C?
This probably means that your vehicle has not yet been sold. You have three choices:
- Request an automatic 6-month extension of time to file your return; you can get this extension by filing Form 4868 either electronically or as a hardcopy by the filing deadline, which is April 18th in 2011.
- File the return without claiming the deduction for the qualified vehicle. After receiving the Form 1098-C, file an amended return, Form 1040X, claiming the deduction. Attach Copy B of Form 1098-C (or other statement) to the amended return.
- File the return claiming a deduction for less than $500 based on the contemporaneous receipt you received from the charity. File an amended return, if the sales proceeds on Form 1098-C you receive from the charity upon sale of your vehicle differ from the amount you claimed as a deduction. Attach Form 1098-C as above
While Cars 4 Causes makes the donation process easy and provides you with all the required documentation, reporting charitable donations on your tax return is not always “easy”. In addition, every individual’s tax situation is different, so you should seek professional advice.
Maria U Berntson, CPA, is a partner at Lindsay and Company LLP, Certified Public Accountant. At Lindsay and Company, LLP, we approach your needs as a team of professionals with diversified skills, focused on providing solutions toward achieving your financial goals as an individual, in business, or as a non-profit organization. For assistance or just to chat about your tax situation, business or financial goals, please contact us at 805-650-5915 or visit us at www.lindsayandcompanycpa.com.