Friday, December 29, 2006
Last Minute Tax Tips for 2006!
Individuals and businesses making contributions to charity should keep in mind several important tax law changes made last summer by the Pension Protection Act.
The new law offers older owners of individual retirement accounts a new way to give to charity. It also includes rules designed to provide both taxpayers and the government greater certainty in determining what may be deducted as a charitable contribution. Some of these changes include the following.
New Tax Break for IRA Owners
An IRA owner, age 70 ½ or over, can directly transfer tax-free, up to $100,000 per year to an eligible charitable organization. This option is available in tax years 2006 and 2007. Eligible IRA owners can take advantage of this provision, regardless of whether they itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans are not eligible.
To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the amount given to the charity.
Not all charities are eligible under this provision. For example, donor-advised funds and supporting organizations are not eligible recipients.
Transferred amounts are counted in determining whether the owner has met the IRA’s required minimum distribution rules. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions.
Rules for Clothing and Household Items
To be deductible, clothing and household items donated to charity after Aug. 17, 2006, must be in good used condition or better. However, a taxpayer may claim a deduction of more than $500 for any single item, regardless of its condition, if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances, and linens.
Guidelines for Monetary Donations
To deduct any charitable donation of money, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. A bank record includes canceled checks, bank or credit union statements and credit card statements. Bank or credit union statements should show the name of the charity and the date and amount paid. Credit card statements should show the name of the charity and the transaction posting date.
Donations of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
Prior law allowed taxpayers to back up their donations of money with personal bank registers, diaries or notes made around the time of the donation. Those types of records are no longer sufficient.
This provision applies to contributions made in taxable years beginning after Aug. 17, 2006. For taxpayers that file returns on a calendar-year basis, including most individuals, the new provision applies to contributions made beginning in 2007.
The new law does not change the prior-law requirement that a taxpayer get an acknowledgement from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet the requirements of both provisions.
To help taxpayers plan their holiday-season and year-end donations, the IRS offers the following additional reminders:
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Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year count for 2006. This is true even if the credit-card bill isn’t paid until next year. Also, checks count for 2006 as long as they are mailed this year.
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Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found on IRS.gov under, “Search for Charities.” In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even though they often are not listed in Publication 78.
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For individuals, only taxpayers who itemize their deductions on Schedule A can claim a deduction for charitable contributions. This deduction is not available to people who choose the standard deduction, including anyone who files a short form (1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceeds the standard deduction. Use the 2006 Schedule A, available now on IRS.gov, to determine whether itemizing is better than claiming the standard deduction.
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For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes a description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes a description of the property and its condition.
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The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value of the vehicle is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return. See IRS Publication 526, Charitable Contributions, for more information.
Wednesday, December 27, 2006
More Gift Card Tips, The Post-Holiday Version
Before you purchase a gift card for someone this holiday season – or if you receive a gift card – there are some things you should find out. Different gift cards have different terms and conditions. Here are some of the most important terms and conditions that you should be sure to check, and that should be disclosed to you:
• FEES. Make sure you know whether fees may apply to the card. Some gift cards may not have fees, but others do charge various types and amounts of fees. Some fees may be paid in cash, but others are simply deducted from the value on the card. These fees may include:
-- Purchase Fees that are charged when you buy a gift card. These are in addition to the money you pay in exchange for the value on the card.
-- Monthly Fees or other regular charges (such as service fees, administrative fees, or maintenance fees) that are deducted from the gift card balance.
-- Inactivity Fees that apply if you do not use the card within a certain time period (for example, a monthly fee that is deducted from the gift card balance if the card’s value has not been used up within 6 months after the card is purchased).
-- Transaction Fees for using the card – either for all transactions, for a high number of transactions, or for certain types of transactions (for example, ATM withdrawals).
-- Miscellaneous Fees for balance inquiries, replacing a lost or stolen card, or other services related to the card.
-- Check to see if the gift card, or its packaging, includes information on fees or provides a toll-free number or website with full information about fees connected with the card.
• EXPIRATION DATES. Make sure you know whether there is an expiration date for the card... and what that expiration date is. If a gift card expires, you may not be able to use it, and the company that sold it to you will keep whatever money is left on the card. If there is an expiration date, you should also find out whether you can ask for the card to be reissued with a new expiration date, and what the fee would be for issuing a new card.
If this information is not stated on the gift card itself (or its packaging), check to see if there is a toll-free number or website that will provide this information.
• LOST OR STOLEN CARDS. You should also find out the rules for lost or stolen cards. Can you get a replacement card? Would there be a fee for doing so? If someone else uses the card after it is lost or stolen, would that money be credited to the replacement card?
If this information is not stated on the gift card itself (or its packaging), check to see if there is a toll-free number or website that will provide this information.
Important Reminder: Keep the receipt for the gift card purchase, and write down the card number. These may be needed if you or the person who received the card as a gift needs a replacement card.
• WHERE YOU CAN USE THE CARD. A store gift card often can be used only at the store where it was purchased (or related stores). Other gift cards, like those with a connection to the VISA® or MasterCard® systems, can be used at many locations around the world. Some gift cards can even be used to get cash at an ATM.
• TRUST. Remember that a gift card is like a loan: you are giving money to the company that holds the value of the card until you use it, and they are promising to give that money back when you ask for it. Make sure you know who is standing behind that promise, and remember that you are putting your trust in that company (and its financial stability).
• PROBLEMS AND COMPLAINTS. If your gift card is lost, or not working properly, or you have some other problem with your gift card, is there a convenient way (like a toll-free number) to make a complaint and get your problem fixed?
If this information is not stated on the gift card itself (or its packaging), check to see if there is a toll-free number or website that will provide this information.
ONE FINAL NOTE TO PURCHASERS OF GIFT CARDS: If information about fees, expiration dates, or other matters appears on a document separate from the gift card itself, make sure you pass that important information on to the recipient to protect the value of your gift!
Saturday, December 23, 2006
Credit Unions Financing More Vehicles, Satisfying Customers
Credit unions are becoming more aggressive in the indirect lending market, as credit aggregators are simplifying the process for dealers to finance auto loans through credit unions, according to the J.D. Power and Associates 2006 Consumer Financing Satisfaction Study.
Now in its 11th year, the study measures customer satisfaction with the new-vehicle financing process. Four factors are examined to determine customer satisfaction with automotive finance provider: provider offering, application/approval process, payment/billing process and customer contact experience.
The study finds that at a growing rate, credit unions are forming alliances with dealers to offer new-vehicle financing, representing nearly 10 percent of loans being issued in dealerships—up from nearly 7 percent in 2005 and 3 percent in 2004. Through the indirect lending channel, credit unions are providing more favorable rates, driven primarily by tax advantages gained from their non-profit status. They are also offering longer-term loans. These factors are particularly beneficial to consumers at a time of rising interest rates, as lower APRs and extended terms help to lower the cost of financing a vehicle.
"As the new-vehicle financing environment adjusts to increasing rates and compressed margins, credit unions are positioning themselves as strong competitors to the established captives, banks and independents, which is underscored by the fact that credit unions have historically provided excellent customer service through their very close, personal ties with their customers," said David Lo, senior research manager of automotive finance at J.D. Power and Associates. "From the dealer perspective, credit unions are currently competing primarily on their rates and terms. Captive providers still have a significant advantage in other offering related areas such as a more competitive reserve and overall compensation per deal."
Overall, finance provider satisfaction drops in 2006, primarily due to a broad-based shift in interest rates. Of particular note is the industry wide effect of the increasing Federal funds rate, which has caused all finance providers to increase their rates. The net effect of this increase is an industry wide decline in satisfaction.
Ford Credit ranks highest in the luxury lease segment for a second consecutive year, performing particularly well in provider offering. In the non-luxury lease segment, Ford Credit leads the rankings for a fifth consecutive year, receiving the highest ratings in provider offering and the application/approval process.
With strong performances in payment/billing and application/approval process, GMAC ranks highest in the luxury loan segment for a second consecutive year. GMAC also ranks highest in non-luxury loan satisfaction and receives the highest ratings from customers in three of the four factors that determine overall satisfaction: payment/billing, provider offering and application/approval process.
The study also finds that the use of electronic contracting (eContracting), which allows dealers to forego paper contracts by submitting an electronically signed document to capture customer signatures, has a positive impact on customer satisfaction. On average, customers whose contract was processed with eContracting technology are more likely to say they are “delighted” with their overall application/approval process when compared to customers who were processed with traditional documentation. In particular, the largest difference in satisfaction is in the ease of filling out paperwork.
"Currently, only 3 percent of customers report that their contract was processed using eContracting,” said Lo. “While the current penetration is very small, this proportion is likely to increase soon. In our 2006 Dealer Financing Study, we found that 75 percent of dealers who currently use eContracting expect the number of contracts processed with this technology to increase within the next 12 months."
Monday, December 18, 2006
What You Should Know About Gift Cards This Holiday
Consumers are projected to spend $25 billion on gift cards in the 2006 holiday season. The Federal Trade Commission tells consumers that gift cards, whether purchased from a retailer, a restaurant, or a financial institution, may come with strings attached.
In particular, consumers should know that some gift cards have expiration dates; others have fees that can lessen the card’s value, including activation fees, transaction fees, monthly maintenance fees, balance inquiry fees, replacement fees for lost or stolen cards, and inactivity or non-use fees. A consumer alert, “Buying, Giving, and Using Gift Cards,” offers consumer tips, including:
* Buy from sources you know and trust. Avoid buying gift cards from online auction sites; the cards may be counterfeit or may have been obtained fraudulently.
* Read the fine print before you buy. If you do not like the terms and conditions, buy elsewhere.
* When buying a card, ask about expiration dates and fees. This information may appear on the card itself, on the accompanying sleeve or envelope, or on the issuer’s Web site. If you do not see it, ask. If the information is separate from the gift card, give it to the recipient with the card to help protect the card’s value. It also is a good idea to give the recipient the original receipt to verify the card’s purchase in case it is lost or stolen.
* Check on purchase exceptions. For example, can the recipient use a store-specific gift card at either the physical store or the store’s website? Can an “all-purpose” card really be used to buy groceries or gasoline?
* Treat gift cards like cash. If your card is lost or stolen, report it to the issuer immediately. You may be out the entire amount on the card. Some issuers do not replace the cards, but others do if you pay a fee. If an issuer charges for a replacement card, you will most likely need to document the purchase and provide the ID number on the card. Most issuers have toll-free numbers to report lost or stolen cards.
Sunday, December 17, 2006
Consumers Can Reduce Trash and Be Green During The Holidays
Americans are flocking to stores and websites to find that perfect gift, that one card that says it all, that tree to end all trees. But as we feast, give gifts, decorate and travel, we consume lots of resources and generate lots of waste. According to the U.S. Environmental Protection Agency, the amount of household trash increases by 25 percent between Thanksgiving and the New Year. That extra waste amounts to 25 million tons.
Christmas, Hanukkah, Winter Solstice, Kwanzaa and New Years may have a special meaning, but this year's festivities don't have to negatively impact our environment. There are a number of ways to lessen the amount of trash we produce - - by reducing, reusing and recycling what we can -- without putting a damper on the holiday season.
Cards and Gifts · Consider buying gifts with the Energy Star logo. They use less energy.
· Buy smart - - be on the lookout for gifts and cards that are recyclable or have recycled content.
· Consider substituting postcards for cards.
· Reuse old holiday cards as gift tags.
· Consider gifts with a history - - from your home or a thrift shop.
Decorating · Decorate with more energy efficient mini-lights and use them when someone is home. This will reduce energy and reduce fire hazards.
· Avoid foil and plastic-embossed paper and cards because they use more resources in the manufacturing process.
· Use wrapping paper from last year to recycle, or consider wrapping presents with cloth or newsprint - - such as comics, travel or sport sections.
Food · When giving food as gifts, use recyclable containers.
· Store leftovers in reusable containers.
Recycling · Review the list of recyclables that your community accepts and be sure to recycle all paper, plastic, glass and aluminum you can.
· Bring your own bags on shopping trips so shops won't have to give you new ones with your purchases.
· Don't take a new gift box with your purchase if you have a supply of old ones, or try to wrap it without a box.
Transportation · Walk or use mass transit when shopping. Or buy your gifts by phone or on the web.
· Choose shops you can walk or bike to, instead of driving. When you need to drive, combine several errands into one trip or carpool with others. Less driving means less air pollution and conserves fuel.
Trees · Buy a living tree you can plant outside or keep as a houseplant.
· Buy a tree grown locally to save energy associated with transportation.
· Buy a smaller tree. There's less to dispose of when you take it down, and shorter growing time translates into less land required.
· If your town doesn't have a tree chipping and tree recycling site - - ask why.
And after the holidays are over you can further reduce the amount of waste generated by:
• Plant or donate live trees and recycled cut trees.
• Donate unwanted gifts and food to thrifts stores and food banks.
• Compost veggie and fruit trimmings.
• Recycle all the glass, paper, and plastics left over from the holidays.
• Remember to recycle old electronics, too - - computers, cell phones, printers, etc.
Tuesday, December 05, 2006
Baby "Keys" Recalled As Choking Hazard
The United States Consumer Product Safety Commission and RC2 Brands have issued a recall of more than a quarter million children's keys, claiming that the top could crack and pose a choking hazard.
“Shake ‘n Jingle Keys,” “Shake & Jingle Keys,” “My Jingle Keys” all by The First Years and the John Deere “Real Keys” are toy keys, with three colored keys attached to a blue, red or green remote control with electronic features. Various colored buttons on the remote activate sounds. Only toy keys with the letter “F” in the date code stamp on the packaging and product are involved in the recall. The date code can be found on the back of the remote control. Toy keys with “TE” in the date code or yellow sides on the remote are not included in this recall.
