Never Miss a Charitable Deduction Again

The Wealthy Accountant is turning into a vibrant community. Readers share their stories helping me do my job of teaching you, kind readers, how to live a joyful life without money problems. Readers also do things your favorite accountant cannot. For example, you would never ask me anything about IT. On my best days I am dangerous when given the access codes to computer files in my office. Karen, my office manager, has a standing order with the IT firm managing all our information to never give me a pass code or access to any secure files. It’s better that way.

When it comes to taxes, the story is different. I immerse myself in taxes the way a college guy plays video games. Most tax questions are front brain answers to me and minor research for most of the rest. (Every now and again someone throws me a curve requiring serious research, but we will not talk about those times to protect the ego of the innocent accountant in the room.) Then a reader sends me a link for a website that blows my mind. John Haldi did just that.

Missing Deductions

Clients tend to have the same problems when providing records to my office. Preparing an accurate return is required. Tax professionals sign tax returns they prepare under penalty of perjury. This means a tax professional better perform her due diligence. Still, the tax pro is not auditing the return, only preparing it. As long as numbers look reasonable, the tax pro will sign off on the return and move to the next. Tax season is triage. Tax accountants have no spare time to debate issues until after the due date.

One area I never gave much thought to was charitable deductions, especially the non-cash kind. If a client gives a car to charity I notice because those situations require special reporting. What I am talking about here is the mountain of clothing and household goods donated to Goodwill and other non-profit organizations.

A significant portion of clients drop receipts in their tax folder for non-cash donations. With rare exception, they put a best-guess estimate of the value of the goods donated. The client thinks they are being aggressive, but experience tells me they are under-deducting, leaving tax dollars in the government’s hands.

The Salvation Army has a worksheet they provide online to track your donations, including the thrift shop value. This is a perfect tool to maximize non-cash donations, but people rarely use it. My office prints a large stack every year for clients; most go unused because they need to be filled out by hand.

John Haldi, a long-time reader, emailed me a website he put together to track  non-cash donations. The best part is it is FREE!!! I wanted to get that out up front so people don’t tune out. John is not a tax guy, but he knows his stuff when it comes to getting the largest deduction for non-cash donations. He has his own accountant (not me) who helped him put accurate information on his site.

John’s site is 8283ez.com, in honor of the form used when itemizing non-cash deductions in excess of $500. 8283ez has simple pull down menus with all the values built in. The program automatically takes the midpoint value for each item which you can change if necessary. (Sometimes a donated desk is worth more than the listed range.)

You still need to get a receipt from the organization proving you donated the goods. What is better with 8283ez is the time it takes to record the deduction. Paging through the Salvation Army worksheet is the main reason few people use it. It takes time to find all the items on the form and tally the donation. It’s easier to just tell your tax guy (or gal) you donated $250 to Goodwill. And in most cases you just screwed yourself.

Taxes are bad enough without overpaying. Mrs. Accountant this past week did some spring cleaning, hauling unused stuff to Goodwill. In the past I would spend an hour entering all the items and adding the amounts. Using 8283ez I was done before I started. It blew my mind.

Minimalists Take Notice

The worst part of non-cash donation recordkeeping is when you move or decide to turn minimalist. The stuff you collected over the years for the first time starts to look like a mountain. In most cases the client tells me they donated, say, $3,000 of stuff. I dutifully enter the deduction on their return. People have no idea how much it is really worth, missing massive tax deductions.

My staff respectfully offers the Salvation Army worksheet for them to fill out; I get maybe three back a year. It is easier to stamp a number on the receipt and move on. Life is too short. I predict this will change with 8283ez. Plugging the numbers is fast, easy and you get a really nice printout to share with your friendly accountant. The way this thing is designed I predict many taxpayers getting a big sloppy kiss from their accountant.

The client thinking their donation was worth $3,000 is always surprised when they list each item out separately. A $100 bag of stuff donated to Goodwill is probably worth double that amount. With 8283ez you can do the right thing and get the full tax break you deserve without painful recordkeeping.

Check out John’s site. Be sure to thank him in the comments below. He created 8283ez because he likes doing that kind of stuff and he doesn’t charge a dime. Anyone who puts together a useful tax site for grins deserves a round of applause. Thanks, John. Thank you for the email introducing this old accountant to a new (and useful) way to do business. You made my life, and that of my clients, better. A good day in my book.