2014
Standard Mileage Rates:  

Per Mile

Business:$0.56

Medical / Moving:$0.235

Service of Charitable Organizations:$0.14

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Greetings! 

The U.S. Tax Court has recently ruled that a taxpayer (Mr. Smith) may not deduct $27,000 in donated property to a charitable organization because he failed the charitable contribution substantiation tests (Smith, T.C. Memo 2014-203). In 2009, Mr. Smith donated furniture and other items he inherited from his mother, clothing belonging to him and his children, and various electronic equipment items, all to American Veterans Service Foundation (AMVETS). He received two blank tax receipts from the AMVETS representatives, which he completed later.

The Court disallowed all of the taxpayer's charitable deduction, finding that Mr. Smith did not meet the substantiation requirements, noting the following deficiencies:

1. Mr. Smith obtained blank signed forms and later filled them out by inserting supposed donation values.   Because the forms were signed before the property was donated, the Court questioned whether they constituted an acknowledgement by AMVETS that it received anything.

2. The AMVETS tax receipts did not contain a description of any property contributed. Mr. Smith created a spreadsheet of the items contributed along with donation values, but there was no evidence this spreadsheet was ever provided to or seen by AMVETS.

3. He did not maintain written records establishing the items Fair Market Value at the time they were donated. The values he claimed were considerably higher than the "high" values suggested by a guide on the Salvation Army website.

4. He presented no evidence that the clothing and household items were in "good used condition or better".

5. He did not obtain a qualified appraisal for any of the items for which the claimed value exceeded $5,000.

Bottom Line: It is the taxpayer's responsibility to document in detail the items being donated including values and condition. One method of additional documentation is to photograph the items to support the value or condition. Frequently places such as AMVETS, Goodwill and Salvation Army will supply a blank receipt. Perhaps a method to protect yourself is to take your documentation to the AMVETS, Goodwill, etc. and have them sign or initial your documentation to confirm they received those goods.  For more details, here's a link to a Donations Substantiation Guide.

Not signing up for Medicare Part B when you are eligible can be a costly mistake. If you don't meet your particular enrollment deadline and then decide to join the program later, you may encounter costly consequences. There are two enrollment periods, and your particular one depends on your personal circumstances:

1. Initial Enrollment Period. This is for those individuals who retired before age 65 and is not covered by a group health insurance plan provided by a still-employed spouse. This period lasts seven months -the three months before your 65th birthday month, the month of your birthday, and the following three months.

2. Special Enrollment Period. This is for the individual who continues to work past age 65 or is older than 65 and is covered by a health plan provided by a still-employed spouse. This period lasts eight months and it begins the month after you or your employed spouse stops working or your health coverage ends (whichever is earlier). Suppose you quit working August 31, but you sign up for 18 months of COBRA coverage, the enrollment period begins September 1 notwithstanding the fact that COBRA coverage lasts for 18 more months.

So what are the costly consequences if you do not sign up for Part B during the enrollment period?

1. Higher premiums. For each 12 month period you delay enrolling when you're eligible, you'll pay a penalty of 10% of your premium - forever.  Also applicable to Part A when the beneficiary has to pay Part A premiums. Part D is also subject to late enrollment penalty, but it is calculated differently.

2. You could find yourself uninsured for an extended period. You will not be allowed to enroll until the next "general enrollment period," which runs from January 1 to March 31, and coverage won't begin until July 1.

3. You may be effectively uninsured even if you participate in a retiree health plan or COBRA. Some of these plans will reject claims during the non-covered period, because upon turning 65, the plan will pay only for medical expenses that Part B won't cover (the employer plan is the secondary payer and the government is considered the primary payer).

 
Doris Cloud 

This newsletter is for general guidance only, and does not constitute tax advice or professional consulting. Before any action, consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information.