Posted on January 26, 2010 by Greg Herman-Giddens

Haiti Donations Qualify for 2009 Tax Deduction

IR 2010-012:

WASHINGTON — People who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season, according to the Internal Revenue Service.

Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card. [Emphasis added.]

"Americans have opened their hearts to help those affected by the Haiti earthquake," said IRS Commissioner Doug Shulman." This new law provides an immediate tax benefit for the many taxpayers who have made generous donations."

Taxpayers can benefit from their donations, almost immediately, by filing their 2009 returns early, filing electronically and choosing direct deposit. Refunds take as few as ten days and can be directly deposited into a savings, checking or brokerage account, or used to purchase Series I U.S. savings bonds.

The new law only applies to cash (as opposed to property) contributions. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both.

To get a tax benefit, taxpayers must itemize their deductions on Schedule A. Those who claim the standard deduction, including all short-form filers, are not eligible.

Taxpayers should be sure their contributions go to qualified charities. Most organizations eligible to receive tax-deductible donations are listed in a searchable online database available on IRS.gov under Search for Charities. Some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov. Donors can find out more about organizations helping Haitian earthquake victims from agencies such as USAID.

The IRS reminds donors that contributions to foreign organizations generally are not deductible. IRS Publication 526, Charitable Contributions, provides information on making contributions to charities.

Federal law requires that taxpayers keep a record of any deductible donations they make. For donations by text message, a telephone bill will meet the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution and the amount of the contribution. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check, or a receipt from the charity showing the name of the charity and the date and amount of the contribution. Publication 526 has further details on the recordkeeping rules for cash contributions.

This year’s special Haiti relief provision is modeled on a 2005 law that, in the wake of the Dec. 26, 2004, Indian Ocean tsunami, allowed taxpayers to deduct donations they made during January 2005 as if they made the donations in 2004.

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Posted on January 15, 2007 by Greg Herman-Giddens

New Charitable IRA Rollover Guidance

Professor Christopher Hoyt of the University of Missouri School of Law has proved a useful summary of IRS Notice 2007-7, 2007-5 IRB 1, which provides guidance about Charitable IRA Rollovers.  This law, which became effective in 2006, allows anyone over age 70 1/2 to have up to $100,000 distributed directly to a qualifying charity and be excluded from income.

1. Yes, charitable IRA distributions can satisfy pledges without violating the self-dealing prohibited transaction rules. "The Department of Labor, which has interpretive jurisdiction with respect to section 4975(d), has advised Treasury and the IRS that a distribution made by an IRA trustee directly to a section 170(b)(1)(A) organization (as permitted by section 408(d)(8)(B)(i)) will be treated as a receipt by the IRA owner under section 4975(d)(9), and thus would not constitute a prohibited transaction. This would be true even if the individual for whose benefit the IRA is maintained had an outstanding pledge to the receiving charitable organization."

2. Yes, a person over age 70 ½ who is the beneficiary of an inherited IRA can take advantage of the charitable IRA exclusion.

3. The prohibition of using an SEP IRA or a SIMPLE IRA for the charitable exclusion only applies to an "ongoing " SEP IRA or SIMPLE IRA. Such an IRA is an ongoing IRA only if a contribution was made to it during the year. Thus , a retired individual who had an SEP IRA or a SIMPLE IRA to which contributions were made during a working career but who is now retired can make charitable distributions from that IRA since no employer contributions were deposited in the same year.

4. No withholding of income taxes -- A qualified charitable distribution is not subject to withholding under section 3405 because an IRA owner that requests such a distribution is deemed to have elected out of withholding under section 3405(a)(2).

5. The exclusion applies to any such charitable distribution made during 2006, even those made before the law was enacted on August 17, 2006. This may be advantageous to people who have "IRA checkbooks" (typically at brokerage houses) where they can write checks directly from an IRA. A person over age 70 ½ who wrote such a check to a qualifying charity early in 2006 can take advantage of the exclusion.

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