New client came in yesterday and said he could itemize this year because he took out a 10 thousand loan last year. I went through his info and told him he didn't have enough deductions to itemize about 15 hundred short. This morning he calls to say he "found" more contributions (all cash). Sure enough 16 hundred more. I asked if he had receipts and said that some were in his check register others were church , which he said he wasn't a faithful church goer but here is 4 hundred for that. I wanted to yell liar liar but didn't. So I told him to write all names and amounts down so I would have a record of where all these donations came from. My question is, will a clients handwritten record save my back side if IRS questioned deductions.
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A check or receipt is required for a cash contributin of any amount. A letter is required for $250 or more.In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Alexis de Tocqueville -
Speaking of contribution documentation, here's an interesting twist. Client's mother died in 2009. Client sent a check to the mother's church in memory of the mother (about $2,400), but the check was drawn on a JTWROS account which had the mother and the client's name on it. The client is not a member of the church. The church sent a single contribution summary at year-end in the mother's name, which included the $2,400.
Can the client just deduct the $2,400 on his tax return and keep the contribution summary from the church, along with a copy of the check, as proof of the deduction? Seems to me that if the mother's return only deducts actual contributions made by her prior to death, then everything would be OK. But then there's the requirement that the acknowledgement be in hand before the tax return is filed. Client doesn't want to ask for revised, separate contribution receipts with the amounts broken out, but maybe he should."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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If I read this correctly
The guy is only saving the tax on $100. I don't think your back side has much to worry about.Originally posted by FRAZZLED View PostIf you loan someone $20 and never see them again, it was probably worth it.Comment
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Technically speaking it will save your "back". However.....Originally posted by FRAZZLED View Post
do you really want this fellow as a long time client?
'nuff said.ChEAr$,
Harlan Lunsford, EA n LAComment
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yes, he should. I would hesitate to take a deduction otherwise.Originally posted by JohnH View Post
He should have come to you for "counseling" prior to the donation. (wry humour there. Maybe)ChEAr$,
Harlan Lunsford, EA n LAComment
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I'll take him to lunch for the counseling so I can deduct it.
"The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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did the loan qualify for schedule A? it could have been a car loan or personal loan. house paid for or refinance?Comment
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Were you innocent and had received a handwritten list at time at the time your client dropped of all other papers, you would be in good shape.Originally posted by FRAZZLED View Post
That changed because you are pretty sure that these additional deductions are fake. Due diligence should be keeping you from changing the return unless you see canceled checks or receipt. You will feel better.Comment
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Thanks for all the in put. 1098 confirmed interest. Client is bringing in cancelled checks. I just freaked out I guess. Must be that time of the year.Comment
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Amazing
what some people will do to itemize. This becomes the focus of their strategy, and they fight a losing battle since the std deduction goes up every year and the interest on their home goes down. Some people try to salvage their interest by putting their house up for collateral on a second mortgage to buy other stuff. So this strategy means they NEVER get their home paid for.
Your guy most likely is in the 15% or 25% tax bracket. So all his digging and bringing receipts to you is going to save him $15, maybe $25. WOW.
I encourage people to emphasize investments, sideline businesses, rental property, etc. instead of try to stuff all their effort into a Schedule A. Living under a bridge gives a couple $11,400 as it is, and that will rise every year.Comment
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If you loan someone $20 and never see them again, it was probably worth it.Comment
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