jim on mon 4 jun 07
On Mon, 4 Jun 2007 14:22:04 -0500, Craig Clark wrote
> Jim, the advice that you have just given runs completely
> contrary to that which has been given to me.
Yes I have seen the same threads here and all I can say is when I run up
against that I go to another tax accountant. You can get tons of opinions.
But anytime I have a doubt there are tons of work arounds. Most true non-
profits will give you a receipt for goods donated in the value of.... They
don't state anything about what they were and all you need is the receipt.
I had another charity that wanted more than just a single item. With them I
sold them all of the pots that they needed then turned around and wrote them
a check for that amount... The main thing to me is that I claim all my
income which is probably at least half in cash and I only deduct what I do
in fact donate. I also will relieve a bit of the raw material deduction
when I do. I have had the books looked at a few times and never had a
problem. I guess like all they would rather play give and take in gray
areas that pop up rather than have crafts persons start only claiming income
that can be traced....
Craig Clark on mon 4 jun 07
Jim, the advice that you have just given runs completely contrary to
that which has been given to me. I have been told that all we as
craftsman or artists are able to deduct is the material costs from the
piece that we donate. This was all brought about by some pretty radical
misuse and abuse of the tax system by several artists back in the late
60's, I think. They were deducting many thousands of dollars for work
that they "donated" and in many instances did not have a real market
for. Congress was moved to act by several particularly egregious examples.
I believe that we have had a post very recently from a professional
account who is also a potter. She contributes to the list on a regular
basis and seems to be quite knowlegable. Unless I have missed
something, her post also stated that the only thing that we as craftsmen
or artists may deduct is the cost of materials for a piece that is
donated to a 501C-3. Perhaps I am mistaken, which would be nice
considering the retail value of the pieces that I donate annually.
Hope this helps
Craig Dunn Clark
619 East 11 1/2 St
Houston, Texas 77008
(713)861-2083
mudman@hal-pc.org
http://mudman00.blogspot.com/
jim wrote:
> Well I for one do donate occasionally to a couple local charities and I do
> deduct the top value of the item I am donating. I am not donating my time.
> I am donating an item and I am allowed to deduct the fair value of that
> item. It is not critical in my circumstance as to where or how I came into
> possession of that item. I also work for a major manufactoring company and
> we donate goods all the time. Also at the value of the item.. If I were to
> buy a pot and donate it I could deduct the value of that pot. So far I have
> not had any objections from my tax attorneys or tax lawyers.. All I have to
> show is that the amount I claim as a value is indeed a reasonable retail
> amount. Yes they can argue that I have also taken off the few dollars or so
> for material but that is so insignificant that it is just too hard for them
> to pin the price with or without that piece. I do agree that even with that
> deduction it is still a large loss of income but I do it to support those
> that I deem really worthy..
>
> Just my take on it.
>
> On Thu, 31 May 2007 16:14:47 -0400, John and Judy Hesselberth wrote
>
>> On May 31, 2007, at 9:33 AM, Richard Aerni wrote:
>>
>>
>> Yes this subject comes up pretty often and seems to be misunderstood
>> by many people. I guess I am one of the few people in the world who
>> thinks the current rule is perfectly consistent with the way other
>> donations of time and talent are handled and is, well, quite fair. I
>>
>
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Richard Aerni on tue 5 jun 07
Jim,
I'm not a tax accountant, so I don't want to get into arguing small points
about something I'm not sure about, but you seem to indicate that you are
prepared to argue that you're not donating your work when you claim these
donations. I wonder, on your schedule C, how you then claim these
deductions for these donations? It would seem to me that they would have to
go on your 1040, long form, under your itemized deductions, in which case
you'd have to have over the, what is it, 10,500 minimum in order for them to
count.
I'm curious how you do this, because if it is legal, you'll have a ton of
folks following your lead.
Best,
Richard Aerni
Rochester, NY
On Mon, 4 Jun 2007 21:47:19 -0400, jim wrote:
>On Mon, 4 Jun 2007 14:22:04 -0500, Craig Clark wrote
>> Jim, the advice that you have just given runs completely
>> contrary to that which has been given to me.
>
>Yes I have seen the same threads here and all I can say is when I run up
>against that I go to another tax accountant. You can get tons of opinions.
>But anytime I have a doubt there are tons of work arounds. Most true non-
>profits will give you a receipt for goods donated in the value of.... They
>don't state anything about what they were and all you need is the receipt.
>I had another charity that wanted more than just a single item. With them I
>sold them all of the pots that they needed then turned around and wrote them
claystevslat on wed 6 jun 07
Jim --
There really are no grey areas in this issue. And if anyone
finds a tax accountant that says different, they are dealing
with either a fool or a liar.
The IRS publication on charitable donations is Publication 526.
If you go to page 10 of this document, you will find the following --
".... If you contribute inventory (property that you
sell in the course of your business), the amount you
can claim as a contribution deduction is the smaller
of its fair market balue on the day you contributed
it or its basis. The basis of donated inventory
is any cost incurred for the inventory in an earlier
year that you would otherwise include in your opening
inventory for the year of the contribution. You must
remove the amount of your contribution deduction from
your opening inventory. It is not part of the cost
of goods sold.
If the cost of donated inventory is not included in
your opening inventory, the inventory's basis is zero
and you cannot claim a charitable contribution deduction.
Treat the inventory's cost as you would ordinarily treat
it under your method of accounting. For example, include
the purchase price of inventory bought and donated in the
same year in the cost of goods sold for that year."
Link to Pub. 526 is http://www.irs.gov/pub/irs-pdf/p526.pdf
-- Don't trust me? Check it yourself. Can't bear to read
IRS verbiage?* No problem. TRUST BONNIE.
-- Steve S
*I know it's not natural, but I read stuff like this and
I say to myself 'ah, bright line -- great!'
--- In clayart@yahoogroups.com, jim wrote:
>
>
> Yes I have seen the same threads here and all I can say is when I
run up
> against that I go to another tax accountant. You can get tons of
opinions.
> But anytime I have a doubt there are tons of work arounds. Most
true non-
> profits will give you a receipt for goods donated in the value
of.... They
> don't state anything about what they were and all you need is the
receipt.
> I had another charity that wanted more than just a single item.
With them I
> sold them all of the pots that they needed then turned around and
wrote them
> a check for that amount... The main thing to me is that I claim
all my
> income which is probably at least half in cash and I only deduct
what I do
> in fact donate. I also will relieve a bit of the raw material
deduction
> when I do. I have had the books looked at a few times and never
had a
> problem. I guess like all they would rather play give and take in
gray
> areas that pop up rather than have crafts persons start only
claiming income
> that can be traced....
jim on wed 6 jun 07
On Wed, 6 Jun 2007 01:19:39 -0000, claystevslat wrote
> Jim --
>
> There really are no grey areas in this issue. And if anyone
> finds a tax accountant that says different, they are dealing
> with either a fool or a liar.
>
>Well I did not make my comments to get into some big debate with anyone
that likes to spend lots of time with regulations anyway. I simply stated
what I do. No more no less. I urge as always each individual to do the
same. Now if this little detail bothers anyone then they surely wouldn't
like my net income filing. I do that often. I don't file deductions for
materials , donations, supplies... I take all my income.. subtract
EVERYTHING that it took me to make it. Be it clay, or paper towels to wipe
the mess up. What is left I claim as income. Now if you are afraid of the
boggie man or black helecopters I would stay away from this method, but when
you do probably at least 1/2 your business in cash there really isn't
anything they can do about it. No worry about what you can or can't deduct
because you did not list a single deduction... And you know what... they
can't make you deduct anything... Again, some go by the intent of the law
and some by the letter. I don't cheat them out of one penny. If it cost me
something to make something that comes off and if they don't like it then it
will give them something to do looking through all their books trying to
find out just how the heck they can get around it. And for goodness sake,
ease up on the records.. Only keep what you need to file your taxes and get
rid of the rest. And again this is just ME... I know it isn't for
everyone... If you worry alot then by all means dot the "i"'s and cross
the "t"'s. But if you grew up with Alfred E. Newman then.. don't worry so
much.. Just throw great pots.
claystevslat on thu 7 jun 07
Jim --
If a veterinarian wants to believe that there's a 'grey
area' for vets, artists*, potters, or cash businesses,
that's amusing but I wouldn't ask for tax advice from
a vet. No competent tax professional will say that there's
a grey area in this charitable deduction question.
I also wouldn't take my sick cat** to Bonnie H.,
(an actual tax accountant) for treatment. No offense,
Bonnie, it's just not your area of expertise.
As for your attitude about tax liabilities, I'd just
note the following -- you're very proud of not claiming
the cost of production as a 'deduction' but you are
probably not filing using the right schedules.
If you file using the form 'C' or 'C-EZ' you'll find
that you are entitled to deduct those costs from your
GROSS income to obtain your NET profit.
That is to say that the tax code encourages you to
subtract these costs from your gross sales to obtain the
'right' net profit.
At first this seems to indicate that you think you're
getting away with something, but actually you're not --
but as it happens, there is a 'gotcha' in the filing process
of which I gather you are unaware. If you FAIL to record
income, you are liable for back taxes, interest, and
penalties, not to mention they can do to you what they
did to Al Capone. They can normally go back 7 years on this.
If the prosecutors believe fraud was involved, I believe they
can go back even farther.
If you fail to claim business costs for which you are
entitled, though, you can go back only 3 years to correct
it.
This means that while you may have generated the correct
net income in your process, you've left yourself with a
four-year long gap for which you can be liable for
additional taxes.
To get your taxes right, you generally don't need to even read
any of the IRS's literature. Take out a schedule 'C' and
look at it -- Part II is a list of Expenses that come out of
gross sales before you get to net profit. These Expenses are
NOT deductions -- and the difference is that as a business owner,
you get to write off every penny -- legally -- of interest,
supplies (clay, glaze materials), utilities, and even some travel
expenses and meals. Oh, and depreciation on capital expenses,
and 'expensing' for some equipment purchases .... there's no
end of benefits to doing it right.
Sincerely -- Steve Slatin
*Remember in the Seventh Seal when Death comes for
the actor hiding in the tree? As Death cuts down
the tree he cries out "Is there no special treatment
for actors?"
** I have no cat.
--- In clayart@yahoogroups.com, jim wrote:
>
> On Wed, 6 Jun 2007 01:19:39 -0000, claystevslat wrote
> > Jim --
> >
> > There really are no grey areas in this issue. And if anyone
> > finds a tax accountant that says different, they are dealing
> > with either a fool or a liar.
> >
> >Well I did not make my comments to get into some big debate with
anyone
> that likes to spend lots of time with regulations anyway. I
simply stated
> what I do. No more no less. I urge as always each individual to
do the
> same. Now if this little detail bothers anyone then they surely
wouldn't
> like my net income filing. I do that often. I don't file
deductions for
> materials , donations, supplies... I take all my income.. subtract
> EVERYTHING that it took me to make it. Be it clay, or paper
towels to wipe
> the mess up. What is left I claim as income.
Kathi LeSueur on thu 7 jun 07
>
>
>>JIm said:
>>
>>Well I did not make my comments to get into some big debate with anyone that likes to spend lots of time with regulations anyway. I simply stated what I do. >>>
>>
>>You may think you have a good system. The IRS will not. If they audit you they will ask for all of your records for the years you are being audited. If you don't have them they will make some "assumptions". It will then be YOUR responisbility to prove those assumptions wrong. You could find yourself with a huge tax liability. For instance, the IRS assumes that a cash business hides 3% of income. If audited it's up to you to be able to show why that assumption is incorrect. There is a reason why tax preparation done by a professional costs money. It is complicated.
>>
KaTHI
>>
>>
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