2012 Charitable IRA Distributions

Heads up retirees!  Sometimes better late than never is well, better late than never.

Congress has belatedly reinstated the rules for tax year 2012, which allow individuals to make transfers from their IRA to a qualified charity (QCD).  The upside:  The distribution is not taxable.  And, of course, the corresponding down side:  The charitable contribution is not deductible.  So how in the world is this going to work since we are now in 2013 and retirees have already taken their 2012 RMDs?  Well, that's where the magic of the "special rules" comes in.  The first "special rule" allows a distribution made to an IRA owner in December of 2012 to be treated as a qualified charitable distribution when all or part of the distribution is transferred in "cash" to a qualifying charity by January 31, 2013.  This is basically a "do-over" for anyone who was waiting for the prior years' QCD rules to get extended.  Another "special rule" states that a taxpayer can elect to have any QCD taken in January 2013, be treated as though made on December 31, 2012.  This might be a good strategy if you forgot to take your 2012 RMD.  So, if you'd like to take advantage of either of these strategies, act today, as the curtain is about to fall on this opportunity.

For more details on this opportunity, you can go to the IRS website or read this article from Forefield Advisor

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Client Portals

There’s no doubt that change can be hard, especially, the older one gets.  But, change can also be a good thing, and we hope that you will welcome a change here at L.K. Benson.

L.K. Benson & Co. will be revising our tax procedures for 2013 by offering online access to various documents. We will be introducing a Portal so that we can securely deliver and receive documents, both tax and non-tax related. This will provide 24/7 access to your documents from anywhere with an Internet connection

Portals are being used more and more every day. In fact‚ if you do your banking or investing online‚ you’re using a portal. Portals are a convenient online storage space in which files can be effortlessly uploaded‚ downloaded‚ stored and shared in a safe and secure environment.

Portals give you instant access to your files, including tax organizers, tax returns, financial statements and source documents. You will be able to access and review completed returns, then print and sign the e-filing release. If you are applying for a loan or need documents for legal purposes, you can quickly and easily download your prior years’ tax returns and source documents to the Portal so you’ll have full access to them at any time.

With Portal, you will be able to:

• Access vital documents 24/7 via a secure online repository.
• Organize documents in electronic cabinets and folders, which mirror the way paper documents are stored.
• Easily upload documents of all sizes without using an FTP server.
• Designate files as read-only or read/write for easier access and greater security.
• Check out documents while updating so other users can’t access the previous version.
• Maintain previous file versions in document history.
• Search, filter and display documents by file type, title, creator, keyword and more.
• Share PDF files, Web pages, hyperlinks, Microsoft® Excel® spreadsheets, Microsoft® Visio® diagrams, Microsoft® Word documents, PowerPoint® presentations and financial software data files, to name a few.
• Upload QuickBooks® files to Portal, eliminating the need to exchange DVDs.

The first phase of this transition will involve your tax organizer.  We will be releasing it in mid-January, closer to when 2012 tax documents are published.  You will have the option to set up a secure Portal to receive the organizer.  (We can still mail it if you prefer that method.)  Specific details will be forthcoming after the first of the year.

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Identity Theft

I can only speak for myself, but it seems impossible that anybody would ever want to be me.  In fact some days I'd probably even pay somebody else to be me!  And yet there are actually thieves out there who would happily steal my identity.  If only these people would take all my problems with them, then maybe we could strike a deal.  In addition to the more common types of identity theft: obtaining credit cards, mortgages, employment information, etc., they are now using other people's information to file fraudulent tax returns to obtain refunds (as Chris explained here).  IRS Twilight Zone anyone?

Obviously, the first course of action is to minimize the risk that your identity could be stolen by doing the simple things, such as:

• Lock drawers and cabinets containing sensitive information.
• Do not carry flash drives around, as they are easily lost or stolen.
• Install and update your anti-virus, spam and malware programs.
• Use and change passwords regularly – on accounts, phones, laptops, etc.
• Shred, shred, shred – especially any documents that have account numbers or social security numbers. (For a reminder of how long to keep certain documents, refer back to this article.)
• Do not respond to e-mails from the IRS, as they do not use e-mail or social media to contact taxpayers.
• Never give out your social security number online.

Now, what do you do if the unthinkable happens and you become a victim of tax identity theft?  (You probably won't even know it until you receive a notice from the IRS.)

• Call the number on the notice or contact the IRS Identity Protection Specialized Unit at 800-908-4490.
• Complete the IRS Identity Theft Affidavit, Form 14039.
• Notify credit bureaus, SSA, credit card companies, banks and the local police.

The IRS has additional information on their web-site www.IRS.gov/identitytheft and www.IRS.gov/phishing. 

As always, feel free to contact us if you have any questions.

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Tax Deadline Coming

We at L.K. Benson & Co.  seem to always be the bearers of bad news:  You owe this...You need to pay that….  What is it now, you ask.   There's less than one month left to get your 2011 individual tax returns timely filed.  (You probably saw that coming.)  Clients waiting for straggling K-1s have lost that excuse, as the filing deadline for partnerships was September 17^th.    So check your mail, e-mail and faxes for your hot-off-the presses K-1s and forward them to us.  This year's "day of reckoning" for Form 1040 filers is Monday, October 15^th.  We still have some clients missing information in addition to K-1s, so please get that in as soon as possible too.  Keep in mind that the IRS interest and penalty “meter” is still running on any unpaid balances due.  That should supply a little additional incentive, just in case you need it.  

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Charitable Documentation

We've all done it.  We're all guilty.  Yes, even I have deducted a charitable contribution for which I did not have "proper" documentation. (Just kidding.  Tax professionals don't do that kind of stuff.)  Before passing judgment though, let's review the IRS rules.

For a charitable contribution to be deductible, the IRS Code requires that a monetary contribution of $250 or more must be substantiated by ALL of the following:

1. A contemporaneous written acknowledgement. This means it must be obtained before the due date of the tax return (including extensions) or the date the return is filed, whichever comes first.
2. The acknowledgement must indicate the amount paid by the taxpayer. (Pretty much of a "no-brainer" on this one.)
3. The acknowledgement must indicate whether the organization provided any goods or services in exchange for the contribution.  And if so, a good faith estimate of such goods and services must be supplied.  (Think bull roast ticket or any contribution involving a meal.)  

Again, the receipt must contain all three of these elements, or you run the risk that your charitable deduction will be denied by the IRS under audit.  In a recent court case, the United States Tax Court disallowed a deduction because a church forgot to include part 3 in their letter to taxpayers, even though they did include parts 1 and 2!  We recommend that you check all your charitable receipts, particularly the large ones, to make sure that they contain the required language. 

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