Determining what donations to charity are worth can be taxing
TO ORDER
Get your copy of “Money for Used Clothing” by visiting www.mfyuc.com or call toll free at 1-866-417-7678. Cost is $25. However, if you mention you read about the book in The Janesville Gazette, you will receive the book’s discounted price of $15. The 2009 book is in production and is expected to ship by the end of May.
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Phillip Yowell of Whitewater drops off clothing and other items that did not sell in his Saturday garage sale at the Goodwill Store and Donation Center in Janesville.
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Items from garage sales often arrive at the Goodwill Store with price stickers still attached.
JANESVILLE — You’ve spent weeks pricing clothing and household items for your annual spring citywide rummage sale.
After the daylong sale has come and gone, you pocket the earnings then load what didn’t sell in the trunk of your car and head to the nearest nonprofit charity thrift shop to drop them off.
But before driving away make sure you get a signed, dated receipt for your donations so you can claim them on your 2009 tax return. It can mean more money for you.
“Don’t guess anymore what your items are worth. There’s got to be more value of what people are really donating than they are taking advantage of and what Uncle Sam will pay,” said Bill Lewis, author of “Money For Your Used Clothing.”
A board-certified public accountant and financial planner from Lincoln, Neb., Lewis integrates tax strategies with investment strategies for his business clients and wrote his first “Money for Used Clothing” book in 1990 out of need.
After years of preparing tax returns and listening to people guess at the value of their donations to charity, “I decided there’s got to be more value than what they’re taking advantage of,” he said.
So Lewis talked with Internal Revenue Service representatives in Washington, D.C., before researching and surveying thrift and consignment shops nationwide to determine the market value of items people were donating to charity. It took months, he said.
The law does not allow charities to set values of donations. Donors are supposed to determine values, but most have no idea what they are worth, Lewis said.
That’s true, said Phillip Yowell of Whitewater, who drove to the Goodwill in Janesville to drop off adult clothing and housewares that didn’t sell during his rummage sale.
Yowell had no idea what his donations were worth nor did he care or request a receipt.
“True charity is giving without getting something in return,’’ he said.
Donors who want help determining values can check out Lewis’ list of more than 700 items of clothing and household goods commonly donated to charity.
“The values … conform to new IRS requirements for valuing donated items,’’ Lewis said.
Following the guidelines are important, Lewis said, because if people overvalue their donations, they are at risk of being audited and paying penalties plus interest.
On the flip side, those who underestimate their donations pay more taxes than they should, he said.
In instances where the IRS challenged those who used Lewis’ booklet to value their donations, “we’ve never lost a challenge,” he said.
Other ways to determine value
Those who don’t want to or can’t afford to buy Lewis’ book—the 2009 edition is in production and will be available by the end of May—have other options for determining values of their donations.
-- Salvation Army Thrift Stores that use sales proceeds to fund adult rehabilitation programs provide a free valuation guide at www.salvationarmyusa.org. Click on Ways to Give then Donation Receipts/Valuation Guide. Here you’ll find a list of values for appliances, automobiles, children’s clothing, furniture, household goods, men’s clothing, miscellaneous and women’s clothing.
“It will assist you in determining the tax-deductible value of any items you are donating to the Salvation Army. You will see that the table includes low and high estimates of value. Please choose a value within this range that is in keeping with your item’s relative age and quality. If you have questions, your local Salvation Army Thrift Store and donation center will be able to assist you,’’ according to the Web site.
A receipt for items may be obtained when dropping off a donation at a local Salvation Army Thrift Store or Corps—worship and community center—where the clerk or receptionist will provide a receipt. If you have donations picked up, the truck driver will provide you a receipt.
-- Federal law permits Goodwill donors to claim tax deductions for their donated clothing, accessories, household goods and miscellaneous items. To help guide donors, Goodwill Industries International has compiled a free suggested list with price ranges for items commonly sold in Goodwill Stores.
To access the list of clothing and accessories, household and miscellaneous items, visit www.goodwill.org, click on donate goods, then tax deductions and valuation guide or visit amazinggoodwill.com, click on donating, then donor guidelines and value guide.
RECORD KEEPING TIPS
-- Indicate the quantity and condition multiplied by market value to calculate your total donation amount.
-- Complete Form 8283 when the value of your donated items exceeds $500. The form requires you to give an approximate purchase price for items being donated plus the approximate dates you bought them. If you do not know the year, write the word “various” on the appropriate line of this form. To print a copy of form 8283 or any other IRS form, you can visit the “Money for Your Used Clothing” Web site at www.mfyuc.com to get linked to the IRS site to print forms.
-- Record how you obtained—bought, received as a gift or inherited—clothes or household goods then estimate the cost of your donated items.
-- Record the name and address of the organizations receiving your donations, the donation date, donation amount, a brief description of the donation and how donation was acquired.
-- Arrange your items on the floor, sofa or bed and take a quick snapshot or video. That will substantiate your contribution if questions ever arise. Keep the visual record with your tax files.
-- Obtain a signed, dated receipt for your donations. Your donations must be made by Dec. 31, 2009, to be claimed on your 2009 tax return.
—“Money For Your Used Clothing”
May 20, 2009 at 7:31 p.m.
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wesgonsin~~and what's funny is that people will yell and be all offended when Goodwill turns away items that are broken. What they don't realize is that if they can't sell it then it COSTS Goodwill money to throw it out. And the furniture you see at Goodwill may not be pretty sometimes, but it does meet certain standards~~it's clean without tears and rips. I live for when the new goods furniture comes in~~great stuff at a fraction of the price!!! WHOOHOO!
May 20, 2009 at 5:49 p.m.
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(And no, not saying you should go to Sears and buy brand new things to give away. Just use a little common sence when you donate)
May 20, 2009 at 5:47 p.m.
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And for everyones sake, don't donate stuff that's obviously garbage to these charities.
Some toy that looked great when you bought it brand new ten years ago is junk now that half the pieces are missing. Same goes for jigsaw puzzles.
That twenty year old pair of jeans with bleach stains and a broken zipper? Throw em in the trash.
Old appliance or electronic item missing its power cord? Don't donate it thinking bargain hunters are just going to buy it.
And I've seen some furniture for sale at Goodwill that I wouldn't let my dog sit on, much less people.
In a nutshell, don't be unloading your trash at Goodwill.
May 20, 2009 at 2:17 p.m.
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will all they tax you I WILL write it off. Ever little bit helps.
is this $500 amount for ONE item? THis part confuses me. I take donations to good will and lots of different items that may ADD up to $500 do I need this special form?
May 20, 2009 at 12:57 p.m.
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But I'm pointing out that you don't need to figure out a donations' value - and you don't need a receipt - if you don't write it off.
May 19, 2009 at 2:11 p.m.
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So true.
May 19, 2009 at 1:43 p.m.
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JustAskMe~~I can see the validity to your comment and wholly agree. But, non profits rely on people donating to them and if it takes a tax credit from the gov't for some people to do that~~then that's how it is. In the end what matters is those who benefit from the donations.
May 19, 2009 at 1:40 p.m.
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The true value of your donation is realized when you DON'T write it off. It becomes a donation that YOU make and don't have the government subsidize it.
May 19, 2009 at 1:30 p.m.
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Thank you for the correction on appraisals. Because of the figure of $500, I forgot that it should be over $5000. Good documentation is still esential on all levels, but especially so with qualified appraisals on donations over $5000.
Clear pictures from cell phones do work. Any type of documentation will be invaluable if you need to prove your figures.
Thank you for donating.
May 19, 2009 at 1:30 p.m.
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I hope that people continue to donate- food, clothing, etc. I do and I know that all my friends and family do ,too! It's good to help others, whether its a can of food or a coat or books. It's all good!!!
May 19, 2009 at 11:27 a.m.
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I certainly hope that this doesn't prevent people from donating!! Goodwill gives you a stamped receipt when you drop off donations. If you use their website, it fairly easy to figure out the value of your donations. I would really hate to see someplace like Goodwill suffer because of this~~they do such great work in providing jobs for those who otherwise wouldn't be able to work!! The good they provide our community is enormous!!! They provide FREE items to those who qualify and provides needed jobs!!
May 19, 2009 at 1 a.m.
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Only about 1 in 4 filers claims any charitable deduction and then the mean claim is just $4. Only 6 million filers submitted form 8283, or about 1 in 25. I did taxes professionally for a while and I only remember it coming up once, when someone donated a car (a working car, not a tow-for-cash thing). Then again, few people would donate that much stuff year after year.
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The cheap digital photo as a record is a good idea -- for a lot of things, such as all your stuff so you can make an insurance claim if it burns up or gets stolen. It's not a regulation.
May 19, 2009 at midnight
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Where did you pull that tax opinion from whosays?
It is quite simple, follow the guidelines set forth in TurboTax's "It's Deductible."
Simply have an invoice of what you are donating filled out BEFORE you donate and then the charity can verify, copy invoice to their receipt and sign it.
Come tax time you know exactly what you donated, can prove it by IRS standards and "It's deductible" breaks down the credit for each item permissible.
The only thing you truly need to understand is kids pants maybe worth 4 bucks while adult pants are worth 8. It pays to break your items down and be specific!
http://turbotax.intuit.com/personal-taxe...
This program works better than my worthless cpa did and I have yet had to file an amended return thanks to missing deductions unlike aforementioned accounting firm.
May 18, 2009 at 8:07 p.m.
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The one fact that is left out of this article is what is a valid value. There are firms that are qualified to give values. The form 8283 must be signed by an appraiser and the organization that you gave the items to.
It is true that the value must exceed $500, but the total of the donations within a tax year, must be counted.
You can only deduct what can be verified by a proper third party. The IRS Codes specify who is qualified. They do not have to belong to any organization, buy credentials, or attend a school, but they do have to prove experience, longivity, and show that they adhere to "Uniform Standards of Professional Appraisal Practice" (USPAP) standards.
You should only be concerned if you wish to deduct an amount from your taxes that exceed the $500 threshold to be able to count. This is especially true for Corporations, businesses, and persons who repeatedly deduct large sums.
Appraisers are listed at Gazlo and in the Yellow Pages.
May 18, 2009 at 5:22 p.m.
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I do this every year VS a rummage sale. THe pictures of the stuff Is that REALLY neccesary. Guess I am screwed if they audit.
and this too:"Record how you obtained—bought, received as a gift or inherited—clothes or household goods then estimate the cost of your donated items"
guess better start saying piles of receipts. guess better get a receipt from the rummage sale I bought some of the stuff from too you think.
May 18, 2009 at 5:05 p.m.
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The government is nothing but crooks! Why does this surprise you sannio?
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Think about this everytime you buy a vehicle you are to pay sales tax. Meaning this...If i went out and bought a $50,000 car and drove it till it died the car would only be charged sales tax once on the original amount. But...if i buy the car and sell it 2 years later, the next owner pays sales tax on the new value, then he sells it in 2 years and the government collects again based on value then, and so on and so on. The government makes more money off cars sold many more times than an expensive one that is never sold again!
May 18, 2009 at 5:04 p.m.
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We just did this! Took everything we had leftover and dropped it off at Castaways in Janesville. GREAT people over there that were really appreciative. At least if you take it to Castaways, you know it's funding medical equipment and the Mercy Homeless Shelter right here in Janesville. I have yet to fill out the receipt and go back to get it signed for the tax deduction, but I can see how that will take some work!
May 18, 2009 at 4:20 p.m.
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I just thought of something: It's strange that something that's donated to charity is charged a sales tax at resale.
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