Wednesday, December 13

Quick Business Tips – Reduce Your Income Taxes

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Following tips might help you in reducing your income tax to half.

1. To benefit from tax deductible donations, start early and make donation in the correct year.  Also, donate to charity any outdated or useless item or gadget that has some sale value.  This can be used for tax deduction.  According to IRS rules, donated items under $500 need to be in good condition. Anything above this amount need not meet this standard.  But it is essential to get it independently appraised to be used as deductible.  Hence, donate whatever you think has a sale value and not in use.

2.  Check out how much is owed to tax authorities. Fill up the form based on this information but do not submit. Use this opportunity to get more information on what you actually owe to IRS.

3. It is pertinent to donate to an eligible charity that is recognized by IRS so as to get a tax deduction on donations.  Check out on IRS website or search internet for list of eligible charities.

4. Obtain a valid receipt from the charity which can be produced for claiming deduction.  If the charity does not furnish a receipt, prepare your own receipt.  You need to write your name and address on a paper along with date of donation and the items donated.  This document can be signed by person receiving donation with his name. 

5. Fill correctly IRS Income Tax Form 1040 Schedule A for receiving deduction on items donated to charity.  Avoid use of 1040EZ form to claim deductions as it might not be accepted.

6. Fill correctly IRS Form 8283 if value of any item you donate crosses $500.

7. Complete IRS Form 1098-C if you are donating large value items like cars, planes, boats etc.  It is pertinent to know that the value of deduction in such cases is limited to the price that the charity receives after selling it. Proper documentation will be required in this case which has to be submitted along with Form 1098-C.

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