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Some Ado about Little

Okay, it’s not the best rip-off of Shakespeare. I thought about calling this blog “Be Careful What You Ask For.” This installment addresses some proposed regulations that came out last week.

Every year, we at HM&M may be perceived by some of our clients as harpies – shrieking, scolding and nagging about obtaining “contemporaneous written acknowledgements” (“CWAs”) from charitable organizations to which they make contributions that they want to deduct on their income tax returns. The contents of a “written acknowledgement” are set forth in the regulations under Section 170 of the Code. “Contemporaneous” generally means having obtained the written acknowledgement at some time before you timely file your return. Don’t have these CWAs at the time that you file your return? No deduction. I blogged on June 5, 2012 about missing CWAs in one case involving millions of dollars of lost charitable contribution deductions and about another case in which the taxpayers lost a mere $22,000 in deductions for contributions to their church. (click here to see June 5 post)

In Section 170(f)(8)(D) of the Code, enacted in 1993, there is an exception to the CWA rule. The donor does not have to get a CWA, if the donee files a return, on such form and in accordance with such regulations as the IRS prescribes. The IRS issued proposed regulations in September 2015 – a mere 22 years later.

Sounds great, right? No more need to worry about collecting those pesky CWAs.   What took the IRS so long? Well, hold on a minute.

First and foremost, do you want any charity to which you give money to have your social security number?   Are you sure that every charity to which you give has appropriate cybersecurity?   The donor’s SSN is required on the proposed form/return.

Second, the filing of such return will be optional for each donee. Also, the use of such return will be optional for the donor.

Finally, the IRS says in its preamble to the proposed regulations that “given the effectiveness and minimal burden of the CWA process, it is expected that donee reporting will be used in an extremely low percentage of cases.”

So, maybe the IRS wasn’t too focused on promptly obeying a statutory mandate of little or no importance or use. Sorry, it looks like we’ll continue to be harpies.

VKM

Click here to see our blog post on www.hmpc.com

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Some More Statistics of Income

The Statistics of Income Program of the IRS released some interesting information last week in Publication 4801, “Individual Income Tax Returns Line Item Estimates, 2013.” (OK, I find it interesting. I never said I wasn’t a nerd.) The analysis involved the information on 65 forms and schedules. Here are a few of the tidbits about the 2013 Form 1040 series and its related forms and schedules.

  • 147,351,299 individual returns were filed, of which 125,317,579 (85%) were filed electronically.
  • Form 8959, Additional Medicare Tax, new in 2013, was filed with 3,335,101 returns.
  • Form 8960, Net Investment Income Tax, also new in 2013, was filed with 3,166,773 returns. I suspect many of the filers of Forms 8959 and 8960 were the same.
  • Alternative Minimum Tax Form 6251 was included with 9,705,282 returns. The AMT arose from the public outrage in 1968 when it was revealed that 155 individuals with incomes exceeding $200,000 paid no tax the previous year. The net has enlarged a bit, hasn’t it?
  • 3,837,716 individual filers claimed educator expense deductions.
  • 8,543,611 individual returns reflected penalties for underpayment of estimated tax.
  • Out of 115,557,210 individual filers who overpaid, only 3,812,435 (3.3%) wanted the overpayment applied to their 2015 estimated tax. I’ll bet that reflects a lot of self-imposed forced savings through withholding.
  • 26,480,680 filers owed tax.
  • When you add the overpaid and the underpaid, you get 142,037,890 returns. Does that mean that 3.6% of 1040 filers got it just right? (Well, it probably means that on most of those returns no tax was due and no tax was paid or withheld.)
  • Last, and least of those forms statistically confidently reported, Form 8834, Qualified Electric Vehicle Credit, accompanied 610 Forms 1040 (.0004%). All these forms were filed electronically, the only 100% electronically-filed forms that I saw.

The next time you want to spend some time alone at a cocktail party, have these statistics on the tip of your tongue.

VKM