Celebrity Tax Troubles and What They Can Teach us: Part II

Celebrity Tax Troubles and What They Can Teach us: Part II On behalf of Brian Coggins of Coggins Law Office posted in Back Taxes or Tax Debt on Friday, August 7, 2015. In our last post, we began a discussion about high-profile examples of tax trouble. Like the rest of us, celebrities are not immune […]

Celebrity Tax Troubles and What They Can Teach Us: Part I

Celebrity Tax Troubles and What They Can Teach Us: Part I On behalf of Brian Coggins of Coggins Law Office posted in Back Taxes or Tax Debt on Friday, July 24, 2015. In June, we wrote about the tax troubles of actress Melissa Gilbert. In comments to the press, Gilbert noted that her tax debt […]

This Kind of Charitable Activity Will Probably Get You Audited

In 2006 and 2007, a California veterinarian donated a group of fossilized trilobites to the California Academy of Sciences. The donation of these fossils, which are the remains of large marine arthropods (i.e., “bugs”) that lived between 250 and 500 million years ago, was a generous contribution to science, to be sure. The vet also hoped to receive substantial tax deductions. Unfortunately, he won’t be getting them.

Large charitable donations can be extremely useful for taxpayers. Not only can they help with that year’s income tax liability, but they may also limit liability for capital gains taxes. The reason is that when you donate appreciated assets to charity, you no longer have to worry about calculations like the base value and appreciation. Instead, you can just deduct the asset’s fair market value.

In order to take a significant charitable deduction, however, you have to be able to prove its legitimacy to the IRS. For a charitable contribution exceeding $250, you’re essentially going to need:

  • A written acknowledgment from the charity, dated that tax year, that the donation was a gift; you received no goods or services in return
  • Your own, reliable written records regarding your ownership of the items and their value, and
  • For gifts valued at $5,000 or more, a qualified appraisal of the item and a summary of that appraisal on IRS Form 8283

In this case, the vet donated four fossils in 2006, claiming a charitable deduction of $136,500. In 2007, he donated another eight fossils for a deduction of $109,800. Why wasn’t he entitled to the deductions?

Primarily, it was because his appraisals were apparently fakes. He submitted appraisals purportedly prepared by a real person who is considered an expert in the field of fossil valuation, but the appraiser could not remember having performed some of the appraisals and denied performing others.

Even if the appraisals had been OK, this taxpayer would still have lost, unfortunately. He did submit written acknowledgements from the California Academy of Sciences, but they did not contain the required statement that no goods or services were given in return.

The lesson? Any substantial charitable deduction must be treated like serious business. A tax attorney could have spotted these issues up front, perhaps saving the deductions. At the very least, it would have saved him a trip to the Tax Court.

Content retrieved from: https://cogginsdata.wpengine.com/Blog/IRS/This-Kind-of-Charitable-Activity-Will-Probably-Get-You-Audited.shtml.

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In 2006 and 2007, a California veterinarian donated a group of fossilized trilobites to the California Academy of Sciences. The donation of these fossils, which are the remains of large marine arthropods (i.e., “bugs”) that lived between 250 and 500 million years ago, was a generous contribution to science, to be sure. The vet also hoped to receive substantial tax deductions. Unfortunately, he won’t be getting them.

Large charitable donations can be extremely useful for taxpayers. Not only can they help with that year’s income tax liability, but they may also limit liability for capital gains taxes. The reason is that when you donate appreciated assets to charity, you no longer have to worry about calculations like the base value and appreciation. Instead, you can just deduct the asset’s fair market value.

In order to take a significant charitable deduction, however, you have to be able to prove its legitimacy to the IRS. For a charitable contribution exceeding $250, you’re essentially going to need:

  • A written acknowledgment from the charity, dated that tax year, that the donation was a gift; you received no goods or services in return
  • Your own, reliable written records regarding your ownership of the items and their value, and
  • For gifts valued at $5,000 or more, a qualified appraisal of the item and a summary of that appraisal on IRS Form 8283

In this case, the vet donated four fossils in 2006, claiming a charitable deduction of $136,500. In 2007, he donated another eight fossils for a deduction of $109,800. Why wasn’t he entitled to the deductions?

Primarily, it was because his appraisals were apparently fakes. He submitted appraisals purportedly prepared by a real person who is considered an expert in the field of fossil valuation, but the appraiser could not remember having performed some of the appraisals and denied performing others.

Even if the appraisals had been OK, this taxpayer would still have lost, unfortunately. He did submit written acknowledgements from the California Academy of Sciences, but they did not contain the required statement that no goods or services were given in return.

The lesson? Any substantial charitable deduction must be treated like serious business. A tax attorney could have spotted these issues up front, perhaps saving the deductions. At the very least, it would have saved him a trip to the Tax Court.

 

Athletes in the Big Leagues Often Pay Big-League-Sized Taxes

Athletes in the Big Leagues Often Pay Big-League-Sized Taxes On behalf of Brian Coggins of Coggins Law Office posted in Back Taxes or Tax Debt on Thursday, July 2, 2015. We have previously written about the complex tax returns many Americans must file. By comparison, most of us have it pretty easy. If you have […]

Let’s Make a Deal: Settling Tax Debt With An Offer In Compromise

Let’s Make a Deal: Settling Tax Debt With An Offer In Compromise On behalf of Brian Coggins of Coggins Law Office posted in Back Taxes or Tax Debt on Friday, June 5, 2015. When you owe the Internal Revenue Service a sizeable amount of money in back taxes, you may be worried that you can’t […]

How Do I Start an Appeal of an IRS Audit?

How Do I Start an Appeal of an IRS Audit? On behalf of Brian Coggins of Coggins Law Office posted in IRS on Friday, June 5, 2015. While taxpayers can fight to protect themselves during an IRS audit, often the auditor hands down a decision that is unfair or not based on the facts. This […]

Did You Report All Your Income to the IRS? Are You Sure?

Did You Report All Your Income to the IRS? Are You Sure? On behalf of Brian Coggins of Coggins Law Office posted in Back Taxes or Tax Debt on Friday, April 17, 2015. April 15th has come and gone. And as it has every year, the world keeps turning. Regardless of whether you have already […]

Alternative Options May Be Available If You Can’t Pay Your Taxes

We’re now less than a week away from the filing deadline for federal tax returns. Many of us procrastinate when it comes to filing because we have seemingly more important (or more entertaining) things to do. But others procrastinate right past the deadline for a more serious reason: they don’t have the money.

If you can’t afford to pay your taxes, it may be tempting to just not file a return. You might assume that the IRS handles millions of returns and probably won’t notice that yours is missing. Unfortunately, this approach rarely works, and the consequences of getting caught are severe.

So what’s the solution? Believe it or not, proactively communicating with the IRS may your best bet. The agency offers a couple of extension options which are free and relatively easy to get approved for. But these extensions just delay the inevitable. And if you don’t have the money to pay in full now, you may not have the money in four to six months.

You can also apply to set up an installment agreement that allows you to pay off your debt over time in monthly payments. This is subject to IRS approval.

Finally, you may be able to settle your debt for less than full value with what’s called an offer in compromise. This tends to be the trickiest option, however, and the IRS rejects many such offers.

Whether you owe back taxes already or are unable to pay what you owe on this year’s return, working with the IRS will almost certainly be better than burying your head in the sand. But even before contacting the IRS, you may want to discuss your case with an experienced tax law attorney who can explain your legal rights and options.

Source: Daily Finance, “Can’t Pay Your Taxes? How to Get IRS Relief,” Dan Caplinger, April 10, 2015

 

Facing an IRS Audit: What Do I Do Now?

Facing an IRS Audit: What Do I Do Now? On behalf of Brian Coggins of Coggins Law Office posted in IRS on Friday, April 3, 2015. With the filing deadline for federal tax returns coming up in just a couple weeks, taxes are on the mind of most working Americans. If you are reluctant to […]