Tips on Travel While Giving Your Services to Charity

Do you plan to donate your services to charity this summer? Will you travel as part of the service? If so, some travel expenses may help lower your taxes when you file your tax return next year. Here are several tax tips that you should know if you travel while giving your services to charity.

• Qualified Charities.  In order to deduct your costs, your volunteer work must be for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are qualified, and do not need to apply to the IRS. Ask the group about its IRS status before you donate. You can also use the Select Check tool on IRS.gov to check the group’s status.

• Out-of-Pocket Expenses.  You may be able to deduct some costs you pay to give your services. This can include the cost of travel. The costs must be necessary while you are away from home giving your services for a qualified charity. All  costs must be:

o Unreimbursed,

o Directly connected with the services,

o Expenses you had only because of the services you gave, and

o Not personal, living or family expenses.

• Genuine and Substantial Duty.  Your charity work has to be real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.

• Value of Time or Service.  You can’t deduct the value of your services that you give to charity. This includes income lost while you work as an unpaid volunteer for a qualified charity.

• Deductible travel.  The types of expenses that you may be able to deduct include:

o Air, rail and bus transportation,

o Car expenses,

o Lodging costs,

o The cost of meals, and

o Taxi or other transportation costs between the airport or station and your hotel.

• Nondeductible Travel.  Some types of travel do not qualify for a tax deduction. For example, you can’t deduct your costs if a significant part of the trip involves recreation or a vacation.

For more on these rules, see Publication 526, Charitable Contributions. You can get it on IRS.gov/forms at any time.

Review Your Taxes This Summer to Prevent a Surprise Next Spring

Each year, many people get a larger refund than they expected. Some find they owe a lot more tax than they thought they would. If this happened to you, review your situation to prevent another tax surprise. Did you marry? Have a child? Have a change in income? Some life events can have a major effect on your taxes. You can bring the tax you pay closer to the amount you owe. Here are some key IRS tips to help you come up with a plan of action:

• New Job.   When you start a new job, you must fill out a Form W-4, Employee’s Withholding Allowance Certificate and give it to your employer. Your employer will use the form to figure the amount of federal income tax to withhold from your pay. Use the IRS Withholding Calculator on IRS.gov to help you fill out the form. This tool is easy to use and it’s available 24/7.
• Estimated Tax.  If you earn income that is not subject to withholding you may need to pay estimated tax. This may include income such as self-employment, interest, dividends or rent. If you expect to owe a thousand dollars or more in tax, and meet other conditions, you may need to pay this tax. You normally pay it four times a year. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to figure the tax.
• Life Events.  Check to see if you need to change your Form W-4 or change the amount of estimated tax you pay when certain life events take place. A change in your marital status, the birth of a child or buying a new home can change the amount of taxes you owe. In most cases, you can submit a new Form W–4 to your employer anytime. 
• Changes in Circumstances.   If you are receiving advance payments of the premium tax credit, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

The deadline for filing a business tax return or tax extension is the same date. For example, if your business return is due by March 16, you must file Form 7004 by March 16 in order to get an extension.

Business owners who report their business activities on their personal tax return (including sole proprietorships and single-member LLCs) should not request a business extension with Form 7004. Instead, these taxpayers should request a personal extension with Form 4868 to extend the filing deadline for both their personal and business taxes. Form 4868 must be filed by the original due date of your personal tax return (usually April 15).

Here are the original filing due dates for various types of business entities (for calendar year filers):

• Sole Proprietorships (Form 1040): April 15
• Single-Member LLCs (Form 1040): April 15
• Partnerships (Form 1065): April 15
• Estates & Trusts (Form 1041): April 15
• Corporations (Form 1120): March 15 (March 16, 2015 this year)
• S-Corporations (Form 1120S): March 15 (March 16, 2015 this year)
• Homeowners Associations (Form 1120-H): March 15 (March 16, 2015 this year)
• Cooperative Associations (Form 1120-C): March 15 (March 16, 2015 this year)
• Real Estate Investment Trusts, REITs (Form 1120-REIT): March 15 (March 16, 2015 this year)
• Real Estate Mortgage Investment Conduits, REMICs (Form 1066): April 15

NOTE: If a corporation files based on the fiscal year, the original filing due date is the 15th day of the 3rd month following the close of the taxable year.

A business tax extension will give you either 5 or 6 more months to file. Businesses that are requesting an extension for Form 1065 (partnerships), Form 8804 (partnership withholding), or Form 1041 (trusts and non-bankruptcy estates) are limited to a 5-month extension. Most other types of businesses, including corporations and REITs, are permitted a 6-month tax extension.

If your business return is originally due by March 16, 2015 and you obtain a 6-month extension, you will have until September 15, 2015 to file your return. If you business return is originally due by April 15, 2015 and you obtain a 5-month extension, you will have until September 15, 2015 to file your return.

It’s highly recommended that you use an Authorized IRS e-file Provider to file your taxes online.

Most people claim the standard deduction when they file their federal tax return. But did you know that you may lower your taxes if you itemize your deductions? Find out if you can save by doing your taxes using both methods. Usually, the bigger the deduction, the lower the tax you have to pay. You should file your tax return using the method that allows you to pay the least amount of tax. The IRS offers these five tips to help you choose:

1. Figure your itemized deductions. Add up deductible expenses you paid during the year. These may include expenses such as:

Home mortgage interest
State and local income taxes or sales taxes (but not both)
Real estate and personal property taxes
Gifts to charities
Casualty or theft losses
Unreimbursed medical expenses
Unreimbursed employee business expenses
Special rules and limits apply. Visit IRS.gov and refer to Publication 17, Your Federal Income Tax, for more details.

2. Know your standard deduction. If you don’t itemize, your basic standard deduction for 2014 depends on your filing status:

Single $6,200
Married Filing Jointly $12,400
Head of Household $9,100
Married Filing Separately $6,200
Qualifying Widow(er) $12,400
If you’re 65 or older or blind, your standard deduction is higher than these amounts. If someone can claim you as a dependent, your deduction may be limited.

3. Check the exceptions. There are some situations where the law does not allow a person to claim the standard deduction. This rule applies if you are married filing a separate return and your spouse itemizes. In this case, you can’t claim a standard deduction. You usually will pay less tax if you itemize. See Pub. 17 for more on these rules.

4. Use the IRS ITA tool. Visit IRS.gov and use the Interactive Tax Assistant that takes you through a series of questions just like one of our customer service representatives would. The tool can help determine your standard deduction. It can also help you figure several of your itemized deductions.

5. File the right forms. To itemize your deductions, use Form 1040 and Schedule A, Itemized Deductions. You can take the standard deduction on Forms 1040, 1040A or 1040EZ.

Some people take an early withdrawal from their IRA or retirement plan. Doing so in many cases triggers an added tax on top of the income tax you may have to pay. Here are some key points you should know about taking an early distribution:

1.Early Withdrawals. An early withdrawal normally means taking the money out of your retirement plan before you reach age 59½.

2.Additional Tax. If you took an early withdrawal from a plan last year, you must report it to the IRS. You may have to pay income tax on the amount you took out. If it was an early withdrawal, you may have to pay an added 10 percent tax.

3.Nontaxable Withdrawals. The added 10 percent tax does not apply to nontaxable withdrawals. They include withdrawals of your cost to participate in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

A rollover is a type of nontaxable withdrawal. A rollover occurs when you take cash or other assets from one plan and contribute the amount to another plan. You normally have 60 days to complete a rollover to make it tax-free.

4.Check Exceptions. There are many exceptions to the additional 10 percent tax. Some of the rules for retirement plans are different from the rules for IRAs. See IRS.gov for details about these rules.

5.File Form 5329. If you made an early withdrawal last year, you may need to file a form with your federal tax return. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, for details.