Tips for Deducting Charitable Donations / Record-Keeping Rules Vary Depending on Several Factors

Tom Herman for the Wall St. Journal writes: If you want to deduct charitable donations on your federal income-tax return, pay attention to some often-overlooked fine print. Record-keeping rules vary depending on the size of your gifts and whether they're cash, noncash or out-of-pocket expenses for donating services.

A few pointers on cash gifts:

-- Even if you make a tiny gift, get proof, such as a "bank record." That may include canceled checks, bank or credit-union statements, or credit-card statements showing the recipient's name, the date and amount of the gift. Or get a receipt showing the charity's name, the date of your gift and the amount. If your return is audited, receipts are very important.

-- If you give $250 or more to a qualified organization during the year, make sure you have an acknowledgment, or payroll-deduction records, as documentation for your gift.

-- For gifts of $250 or more, make sure the acknowledgment says how much you gave and whether you received goods or services in return (other than what the IRS calls "token items and membership benefits"). If you got something in return, such as opera tickets, the acknowledgment should describe it and estimate its value. You typically can deduct only the amount that exceeds the value of what you received.

Even if you didn't get anything in return, the receipt should say so ("no goods or services were provided in exchange for this gift"), says Martin Hall, a lawyer with Ropes & Gray. Get that acknowledgment by the date you file your return for the year you make the gift (or the due date, including extensions, for filing the return, whichever is earlier). "It's too late to get it after your deduction has been questioned on audit," Mr. Hall says.

Don't worry about any of this if you choose the standard deduction, as nearly two-thirds of taxpayers do. If you do, you can't deduct charitable gifts.For more, see the IRS website (www.irs.gov).

IRS Announces New “Penalty-free” Program for Delinquent Expats

Joshua Ashman for ExPatProfessionals.com writes: On June 18^th, the IRS announced significant changes to the current Streamlined program.  As many of you may know, since June 2012, delinquent U.S. expats were afforded the opportunity to catch up on their U.S. taxes and FBARs (Foreign Bank Account Reporting) without being subject to penalties and by filing only a limited number of tax returns and FBARs.  However, the criteria for qualifying for the Streamlined program were very rigid and narrow, essentially leaving many U.S. expats “out in the cold” with the only real (i.e., legal) option of going through the more costly and gruesome OVDP (Offshore Voluntary Disclosure Program).

Effective July 1, 2014, this has all changed.  The IRS has gone away with several of the more challenging criteria and has essentially opened up the Streamlined program to any U.S. expat who can certify that their prior non-compliance was non-willful.  In addition, the IRS will no longer require the risk questionnaire and has eliminated the $1,500 tax liability threshold.

What does all of this mean?  In a nutshell, thousands of U.S. expats who have innocently failed to file tax returns or FBARs and who can establish that they did so without any intent to cheat the IRS or evade paying taxes, can now start fresh by filing three years of missing tax returns and six years of missing FBARs without being subject to penalties.  More information can be found in the revised FAQs published by the IRS here

– http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program-Frequently-Asked-Questions-and-Answers-2012-Revised

In addition, the IRS has published a special FAQ list covering transition rules for those who are already in the OVDP.  These FAQs can be found here 

– http://www.irs.gov/Individuals/International-Taxpayers/Transition-Rules-Frequently-Asked-Questions-FAQs

In the coming days and weeks we will be closely following these changes and will update our website with more detailed information and insights regarding the Streamlined program.

If you happen to have fallen behind on your U.S. tax returns or FBARs, these modifications present a tremendous opportunity for you to come clean and start fresh without paying penalties.  At Expat Tax Professionals, we’ve been assisting U.S. expats all around the globe with catching up on their U.S. taxes via both the Streamlined program and OVDP and we’re happy to hear from you in order to see how we can be of assistance in your case.