Big Money Charity Donations Drop, According to New Survey

2010 was a bad year for charities, especially those looking to land big donations from America's wealthiest taxpayers. According to new reports, the 54 top givers in the country only donated $3.3 billion last year, which is the smallest sum since 2010. Even more interesting, few donations from the 50 who pledged to “ultimately donate half of all wealth.” I guess that starts in 2011?

Yahoo Finance reports:

Not many of those 54 donors are members of the premium tier of net-worth individuals. Of the 400 wealthiest Americans ranked by Forbes magazine, only 17 appeared on this year's list of the most-generous donors.

Noted investor George Soros topped the list with donations of $332 million, followed by media magnate and New York City mayor Michael Bloomberg, with donations of $279.2 million

There are signs the money might not be going to where it's most needed.

According to The Chronicle, nearly half of the 65 gifts of $5-million or more went to colleges or universities, a fact sure to upset those who argue the money would have more utility if applied to other causes.

But not all that money went to the "put my name on a building fund." Some of the gifts were specifically earmarked for student scholarship funds, or clean energy research programs.

Interestingly, no big gifts to colleges came from the under-50 set. Mark Zuckerberg, CEO of Facebook and the world's youngest billionaire, made the top ten list with his donation of $100 million to the Newark, N.J., school system.

The lack of high-dollar gifts is likely to cause pain as charities work to survive a tough economy.

Read more here

It’s Time to Rethink the Charity Deduction

The tax compromise has passed, so at least we know what our taxes look like for the next two years. But what happens after that? What will Congress do when our economy recovers? We know we’ll need to raise more tax revenue to make up for all this federal debt, but how? The author of the NYTimes article below believes we need to rethink the charitable contributions deduction. But, will people give so generously without the tax incentive?

First, some basics. If there is one thing that most economists agree about in the realm of tax policy, it is that it’s best to broaden the base of any tax, all else being equal. That means minimizing the number of deductions and exclusions from taxable income in order to lower marginal rates and reduce distortions. N. Gregory Mankiw made this case powerfully in this space recently, and President Obama and the Bowles-Simpson fiscal commission have taken up the cause as well.

In light of our prolonged economic doldrums, a decision to cut taxes for now is both popular and justifiable. But, eventually, Congress will have to face up to the fact that to deal with the long-run deficit problem we have to raise tax revenue as well as cut spending. Many Republicans know this deep in their hearts but can’t bring themselves to actually say it, for fear of excommunication.

Broadening the base can solve this quandary because, by reducing deductions, lawmakers can cut tax rates but increase revenue. This is one type of voodoo economics that actually works.

Two deductions are likely to be central in any debate on tax reform: those for mortgage interest and for donations to charity. With the housing market still suffering, it is hard to persuade anyone to consider changing the mortgage deduction right now, so I will concentrate on charitable giving.

Read more at NYTimes.com…

How to Claim a Charitable Contribution Deduction

Last week my team put together another great tax tip video. In this new episode our hosts, Edward and James, sat down to discuss the charitable contribution deduction. You can watch the embedded video below or visit my YouTube channel for more great tax videos.

Charities and Deductions

My YouTube team shot another tax tips video last week. In this episode, host Edward Lester shares some tips on claiming charitable contributions on your return. Be sure to enjoy the embedded video below and check out my YouTube channel and subscribe to my future videos.

Questions for the Tax Lady: February 8th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: When is the deadline for making donation’s to Haiti relief funds that can be included as charitable contributions on my 2009 return?

According to the IRS contributions of cash made after January 11, 2010 and before March 1, 2010, can be treated as contributions made on December 31, 2009 if such contributions were for the purpose of providing relief to victims in areas affected by the earthquake in Haiti that occurred on January 12, 2010. To be safe, you should try to make any donations that you plan to include on your tax return as soon as possible.

Question #2: What items should I bring with me when I take my tax return in to have it prepared?

I actually posted a blog entry on this very topic a few weeks ago. You can find the detailed list here, but essentially you will want at least the following items:

1. Identification

2. Last Years Tax Return

3. Documentation from ALL Sources of Income

4. Self Employment Documents

5. Financial Gain or Loss Statements

6. Mortgage and Real Estate Taxes

7. Automobile and DMV Documents

8. Deductible Expenses Receipts

9. Additional Deduction Documentation

10. Anything Else your Tax Professional Wants

10 Ways to Make Tax Deductible Donations to Haiti

Yesterday, Haiti was sadly struck by another earthquake. As we have all heard in the news, the island was devastated by a series of massive earthquakes on January 12^th. The disaster left thousands of Haitians injured or dead, and the relief efforts have encountered all types of problems. There are dozens of organizations working to provide assistance to the people of Haiti, and to help encourage all my readers to make a donation I have put together the following list of ways to contribute as well as a brief explanation of how you can deduct the contributions from your taxable income next year.

Donations are Tax Deductible

With tax season beginning, finances are probably on everyone’s mind. Keep in mind that all charitable contributions are tax deductible. Reach into your pockets a little deeper to donate as much as you can to the relief efforts. Just make sure that you keep records of your donations for next tax season.

Top 10 Ways to Make a Donation

1. Cell Phone Donations

If you cannot afford to make a sizeable donation to the relief efforts then you can make a small and easy donation from your cell phone. You can text HAITI to 90999 to donate $10 to the American Red Cross, or text HAITI to 25383 for a $5 donation to the International Rescue Committee. You will see the charge on your next phone bill, so be sure to keep it stored with your other tax documents.

2. Larger Donations to the Red Cross

If you want to donate more then $10 to the Red Cross, and do not have time to send a dozen text messages, then you can use a credit card to donate either over the phone (1-800-REDCROSS) or by visiting their website. If you would like to mail a check then you can send it to the American Red Cross, P.O. Box 37243, Washington, D.C. 20013.

3. Clinton Bush Haiti Fund

In a sign of bipartisan support for Haiti, former presidents Bill Clinton and George W. Bush setup the nonprofit Clinton Bush Haiti Fund. As of today, the fund claims to have received over 126,000 contributions. You can donate through their website, or text QUAKE to 20222 to make a $10 donation through your phone. You could also mail donations to The Clinton Bush Haiti Fund, c/o William J. Clinton Foundation, Donations Department, 610 President Clinton Avenue, Little Rock, AR 72201.

4. Music for Relief

To encourage younger generations to donate, popular music artists including Linkin Park, Dave Matthews Band, Alanis Morissette, the All-American Rejects, Enrique Iglesias and other teamed up with Music For Relief. Their site offers a free music download, but prompts users to make a donation after downloading.

5. UNICEF

UNICEF works in over 150 countries to provide children with nutrition, education, and emergency relief. To encourage taxpayers to donate the U.S. Fund for UNICEF is “absorbing all associated administrative costs so that 100% of every dollar you give to the U.S. Fund for UNICEF will support UNICEF's relief efforts for children in Haiti.” To donate check out this link on their website, or call 1-800-4UNICEF.

6. National Nurses United

Over 10,000 nurses have reportedly already volunteered to go to Haiti to work with relief organizations. However, National Nurses United still needs more funding to send them to Haiti. You can make a donation through their website, with all proceeds going directly to the fund to send nurses to Haiti.

7. AmeriCares

AmeriCares is a nonprofit organization that provides disaster relief by supplying medicine and medical supplies to victims. They have already sent over $6 million worth of supplies to Haiti, and are actively seeking more donations. You can make a contribution by dialing 1-800-486-HELP or visiting AmeriCares.org.

8. Doctors Without Borders

Another nonprofit group that has been active in Haiti is Doctors Without Boarders. They are using funds to repair hospitals and send doctors to create temporary emergency centers to treat victims in Haiti. Go to Donate.DoctorsWithoutBorders.org and you can make a donation from $35 all the way up to $10,000.

9. World Water Relief

Sadly, clear water is scarce in Haiti and the people need clean water not only for drinking, but also for sanitation and medical treatment. World Water Relief has already sent a team with 18 self-sustaining portable water flirtation units to Haiti, and they are already planning their next effort. 100% of donations go to the cost of sending water systems to Haiti, and you can help by making a donation through their website.

10. Hope for Haiti Telethon

Tomorrow (Friday, January 22) actor George Clooney is hosting the Hope for Haiti Emergency Fundraising Telethon from 8 to 10 pm. Guests will include Mary J Blige, Robert Pattinson, Justin Timberlake, Christina Aguilera, Zac Effron, and many others. The telecast will air on ABC, CBS, NBC, FOX, CNN, BET, The CW, HBO, MTV, VH1 and CMT, without commercial interruption. You can tune in, and make a donation over the phone using your credit card.

IRS Approves 99% of Applications for Public Charity Status

According to NY Times, the number of charities that are consider qualified non-profit groups in the eyes of the IRS has grown by over 60% in the last ten years. As an American taxpayer you can make deductible donations to over a million different charities.

Experts say nonprofits are skillfully exploiting the tax code’s broad and elastic definition of what constitutes such a charity, making it difficult for the Internal Revenue Service, which must bless them, to say no. The agency approved 99 percent of the applications for public charity status last year, according to a new study by students at Stanford University — or more than one every 10 to 15 minutes.

Take the Woohoo Sistahs, a social club that won approval last year. Its 50 or so members meet regularly over drinks and dinner in the Hampton Roads area of Virginia and raise money for cancer research and other causes through walkathons and sales held in retailers’ parking lots.

What the Sistahs do is not so different from what the Shriners have done for decades to raise money for their hospitals — except that the Sistahs can offer their donors a tax break that the Shriners cannot because decades ago they registered as a different type of charity with the I.R.S. (Direct donation to Shriners hospitals are deductible.)

The $300 billion donated to charities last year cost the federal government more than $50 billion in lost tax revenue.

“Especially during these tough economic times, it’s troubling to hear we are increasing the number of these organizations at such a rapid pace,” said Representative Xavier Becerra, a California Democrat who is one of the few members of Congress to pay attention to the nonprofit sector.

Continue reading at NY Times.com…

How to Stay Charitable During the Recession

Although the recession is affecting each of us in some way – commonly through declining home values or job losses – charities and non-profit organizations are being hit the hardest. However, even as everyone is tightening their personal budgets, being charitable is still your best interest as a U.S. taxpayer. In addition to the feeling of knowing you have done something good for a fellow American, you will be able to deduct your donations come tax season.

One of the biggest reasons charities are suffering so much is the obvious decline in donations. As Americans across the country make a greater effort to save money, many are choosing to decrease – and frequently halt – regular donations to their favorite charities. In addition to less personal donations, giant corporations that used to donate millions of dollars per year are being forced to make cuts. Likewise, dozens of small business owners and sole proprietors that also used to make large charitable contributions are cutting back. In fact, the Red Cross is reportedly seeing a reduction in donations by around 30% this year.

As if a decline in donations was not enough, due to massive job losses and home losses, the country has a greater need for charity now then it has in decades. Homeless shelters in some cities are becoming so crowded that they are turning people away. At the same time, those overcrowded homeless shelters are struggling to stay open because of a decline in donations and financial support. The same can be said for food aid programs, blood drive programs, or just about any charitable or non-profit organization you can think of.

As the recession continues more and more charitable groups are struggling. However, even if your income has gone down there are still plenty of ways to remain charitable.

1. Do NOT Spread it Out

A lot of people who are used to donating to multiple charities – but can no longer afford to make large monetary contributions – are hoping to simply make much smaller donations to each charity or non-profit. However, charity organizers say that while making small donations are always appreciated; donating a larger amount to one or two charities will often make a much larger impact.

2. Volunteer your Time

If you cannot afford to help out a non-profit by donating money, then you can volunteer your time. You could deliver foods for a local "Meals on Wheels" chapter, or help out at a food shelter. Although you cannot take a tax deduction for your time, you can deduct any direct expenses you incur as long as the charity you are working with is qualified. Therefore, if you bought gas for your car to participate in a "Meals on Wheels" program then you could deduct it on your tax return. Just be sure to keep the receipts!

3. Business Donations

If you own your own business, or are self-employed, then you can make donations on behalf of your business. This means you could donate any old office equipment you are no longer using, and if your business does free work for a charity then you can consider the time spent working on the project as a donation.

4. Non-Cash Donations

Since most of us are tight on cash because of the poor economy, you can also consider donating non-cash items such as clothes, food, or even a vehicle. Even though the donation is not money, you can still get a tax deduction as long as you get a receipt for the donation. However, the IRS has become very weary of non-cash deductions, so make sure you only claim the “fair market value” of the item donated.

5. Get More People Involved

When it comes to charity the more people you can get to help the better. Gathering your family, church group, or coworkers to help out at a charitable event will make volunteering both more enjoyable and more efficient. You could even speak with your employer, or human resources department, to help organize a company wide donation event.

Court: No Tax Deductions for Religious School Fees

From MercuryNews.com:

A federal appeals court says a Jewish couple can't claim tuition paid to their children's religious schools as a tax deduction.

Michael and Marla Sklar of Los Angeles had attempted to claim the tuition payments for their five children as a charitable contribution to a religious organization.

But the 9th U.S. Circuit Court of Appeals upheld a lower court decision in rejecting that claim Friday. It ruled that the couple paid only for their children's education and had not shown that any of the tuition was used by the schools as a gift.

The Justice Department, which represented the IRS, says the ruling shows that religious schooling is not tax deductible.

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New Law Encourages Cash Donations for Midwest Disaster Relief

According to their newest press release, the IRS is encouraging “Taxpayers who make qualifying cash contributions for disaster relief efforts in the Midwest could benefit from a recently passed law that suspends the percentage-of-income limits that would normally apply when taxpayers deduct the contributions on their 2008 federal tax returns.

Under the Heartland Disaster Tax Relief Act, an individual taxpayer who itemizes deductions may choose to deduct qualifying cash contributions up to 100 percent of his or her adjusted gross income, reduced by deductions for other charitable contributions. Similarly, an electing corporation may deduct qualifying cash contributions up to 100 percent of its taxable income, reduced by deductions for other charitable contributions.

Cash contributions qualify for this special treatment if they are made to a public charity for disaster relief efforts related to certain areas in Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska or Wisconsin. The areas must have been declared federal disaster areas on or after May 20 and before Aug. 1 of this year as a result of severe storms, tornados or flooding, and the areas must have been designated to receive individual assistance from the federal government because of the damage resulting from the disasters.

The contributions must be made no later than Dec. 31, 2008. “Cash” includes payments made by check or credit card. Qualifying cash contributions do not include payments to a supporting organization as described in section 509(a)(3) or for the establishment of a new, or maintenance of an existing, donor-advised fund.

Qualifying cash contributions of more than the amount allowed as a deduction can be carried over and deducted in succeeding tax years, subject to the normal limits. To substantiate the deduction, a taxpayer must obtain from the charity a written acknowledgment that the contribution was or will be used for relief efforts related to one or more of the Midwestern disaster areas.

In addition, deductions by individuals for qualifying contributions are not treated as itemized deductions for purposes of the overall limitation on itemized deductions. This means that, for taxpayers with higher adjusted gross incomes, the deduction for these qualifying contributions is not limited the way other itemized deductions are limited.”

Redefining What It Means to be Charitable: Raising the Bar with a Public Benefit Requirement

Tiffany Keb, of the University of Oregon, has published this interesting research paper on charitable contributions in the United States. Below is a snippet from the introduction, but you can download a PDF of the full paper by clicking here.

“This Comment seeks to explain how a public benefit requirement will improve the charitable sector in America. Part I explains what it means to be “charitable” in American tax law, and provides a general idea of what an organization must do to be exempt from federal taxes under § 501(c)(3). Part II describes the substantial benefits of being classified as a § 501(c)(3) organization. Additionally, possible rationales for preferential treatment of charitable organizations in the tax code are explored. Part III illustrates the need to reform current charity law, and explores what that restructuring might look like by examining reform occurring at the state level. It also examines charity reform recently passed in England and Wales in the Charities Act, which potentially offers a creative solution to reforming the American charitable sector. Part IV explores some of the concerns of government officials at the federal level regarding the charitable sector by summarizing a recent hearing before the House Committee on Ways and Means. Finally, Part V argues for the adoption of a public benefit requirement similar to the one in the Charities Act. Essentially, a public benefit requirement has already been adopted in several states, at least regarding the regulation of nonprofit hospitals. The success of these states in formulating public benefit requirements is evidence that doing the same at the federal level will not be unduly burdensome.”