Every town has a crazy cat lady, with way too many cats littering her property. Neighborhood kids walk past the house and wonder if it's haunted. Adults drive past and imagine the interior looks like a scene from Hoarders. But — what if the crazy cat lady is a sharp-as-a-claw attorney who's not afraid to take on the IRS?
Jan Elizabeth Van Dusen is a graduate of UC Hastings College of Law and an attorney in Oakland, CA. She's also a volunteer for Fix Our Ferals, an IRS-recognized 501(c)(3) nonprofit organization dedicated to providing free spay/neuter clinics for feral cats in San Francisco's East Bay area. Van Dusen devoted essentially her entire life outside work to the organization. She trapped feral cats, had them neutered, obtained vaccinations and necessary medical treatments, housed them while they recuperated, placed some of them for adoption, and released others back into the wild.
In 2004, Van Dusen reported keeping between 70-80 cats — so many, in fact, that she couldn't recall where they all came from. Seven of the cats were her own pets; the rest were foster cats she cared for as part of her volunteer activity. Most of them roamed freely around her home (except for bathrooms); however, some of the less-domesticated cats stayed in a room called the "feral room" or lived in cages for taming or because of illness. Every day she fed, cleaned, and looked after the cats, laundered their bedding, and sanitized the floors, household surfaces, and cages. She even bought her house "with the idea of fostering in mind."
Van Dusen also spent a small fortune taking care of the cats, including pet supplies (food, medicine, litter and litter boxes, pet dishes, and other supplies), cleaning supplies (garbage bags, paper towels, laundry and dish detergent, and other similar cleaning supplies), and even higher utility bills from laundering so many loads of cat bedding and running a special ventilation system to ensure fresh air. (Let's face it, folks, with 80 cats in the house, it had to smell at least a little gamey.) Even her garbage bill went up because of all the cat waste!
For 2004, Van Dusen claimed $12,068 in noncash charitable contributions for her rescue work on behalf of Fix Our Ferals — $1,381 in supplies, $9,607 in vet bills, and $1,080 in utilities. The IRS shot her down. But tax deductions for foster cats, like Van Dusen's cats themselves, may really have nine lives — so Van Dusen appealed to the Tax Court and even chose to represent herself.
Last week, the Court issued a 42-page opinion in Van Dusen v. Commissioner. The Court found that portions of Van Dusen's veterinary expenses, pet supplies, cleaning supplies, and utilities were "directly connected with and solely attributable to" her services to Fix Our Ferals. After several pages examining the state of Van Dusen's records (including three full pages on the woodstove pellets she used as cat litter), the Court let her take 90% of her vet bills and 50% of the supplies and utilities. However, charitable contributions of $250 or more must be substantiated with a contemporaneous written record from the charity itself. Since Van Dusen had no such acknowledgment, the Court disallowed all expenses above $250.
You don't have to be a crazy cat lady to deduct your volunteer expenses. You just have to know the rules. Keep good records! Make sure you get a statement from the organization acknowledging any expenses over $250. And call us with your questions, so we can help you make the most of those often-overlooked deductions!
Monday, June 6, 2011
Wednesday, June 1, 2011
June 1, 2011 Client Newsletter
I have been suffering a severe case of writers block. It has been six weeks since the end of tax season. We have focusing on catching up first quarter bookkeeping and starting to clean up stuff that we couldn’t get to prior to April 15th. Little time or desire to write to you this month. We will give it our best shot.
Today the news was filled with really bad financial news. Especially concerning is the housing market. I just read that home equity is dropping at an alarming rate. My father, who has had his home in La Grange Illinois for sale since November 2010 told me today that he has been forced to drop the listing price by more than $30,000.00 since that time. The impact of high gasoline prices, especially here in Illinois where we have proudly won “highest gasoline prices in the nation award” is a real life “economic tax” to your customers and clients. Money spent on higher gas prices cannot be spent in your business. I am truly baffled by the 30 cents a gallon increase today while the price of oil has dropped and inventories are up. Our crystal ball is getting clearer now and the recovery if any is still some distance away.
In this down economy, many small business owners are left wondering: "What does this mean for me?"
Despite the economic slow-down, there are several things small business owners can do to survive, and even thrive according to nonprofit micro finance organizations ACCION USA .
2. Keep Stock Low.
A damaging admission. I don’t know how we did it. But we did it. Some clients did not get billed for monthly work in April. Sorry about that. So if you see a extra monthly service or your bill is for two months and not reflecting payment, the reason is simple. We did not bill you. Questions please call.
Each year after tax season we take a look at how we can improve our service for our clients. Client centered is the latest buzz word. And it makes a lot of sense. Client-centered focuses on the client's needs, concerns, priorities, and questions. We are doing our best to improve our client communication. Here is what to expect: Improved client communication. Whether it is an updated web site, better email communication from us. Expect to hear from us more often. And we expect you to communicate with us. Our open door policy has served us well for the last 30 years. Have a question? Call us first.
In the next few months we will be publishing three new reports:
What we learned from working with small businesses for the last 30 years.
The last word about small business cash flow.
What every business owner should know about their taxes.
The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, which passed Congress on April 5, 2011, eliminated two recently enacted 1099 reporting requirements that were to take effect in 2012. Repealed was the onerous 1099 requirement for purchases made and rental expenses. Can you say firestorm? That is very good news.
Still on the books, however, are a couple of new 1099 reporting requirements effective for 2011. Specifically if you sell stock or mutual funds, the brokerage or mutual fund company handling the transaction will have to now identity the capital gain or loss for that transaction. In addition if you process more than $20,000 in credit card sales, the credit card processing company will now report the total of credit card sales to both the IRS and you.
I applaud the decision to report the entire capital gain transaction, including the basis and gain or loss on the 1099. We have spent countless time researching cost basis for our clients. Some clients are just baffled about the sale of their security. This requirement is very consumer friendly and certainly will stream line the tax preparation process on this end. Some good did come out of a very bad law.
Today the news was filled with really bad financial news. Especially concerning is the housing market. I just read that home equity is dropping at an alarming rate. My father, who has had his home in La Grange Illinois for sale since November 2010 told me today that he has been forced to drop the listing price by more than $30,000.00 since that time. The impact of high gasoline prices, especially here in Illinois where we have proudly won “highest gasoline prices in the nation award” is a real life “economic tax” to your customers and clients. Money spent on higher gas prices cannot be spent in your business. I am truly baffled by the 30 cents a gallon increase today while the price of oil has dropped and inventories are up. Our crystal ball is getting clearer now and the recovery if any is still some distance away.
In this down economy, many small business owners are left wondering: "What does this mean for me?"
Despite the economic slow-down, there are several things small business owners can do to survive, and even thrive according to nonprofit micro finance organizations ACCION USA .
1. Know Your Market.
If you haven't yet researched your suppliers, or competitors before, now is the time. Talk to customers about their needs in this environment, get a sense of your suppliers' financial stability, and talk to neighboring businesses about your shared market in this economic environment.2. Keep Stock Low.
Most consumers are spending and buying less.Try to keep your supplies and stock low so that you don't get stuck with products you can't sell. Try to only buy what you need whenever possible.
3. Maximize Marketing.
Instead of putting a freeze on marketing, think about ways to get more out of it. Promotions and specials are especially useful during hard financial periods because they provide customers with an incentive to buy. A limited-time "2-for-1" special is an easy, cost-effective promotion.
4. Reduce Your Dependency on Credit Cards
Business owners who approach this financial crisis as a short-term situation might find themselves too dependent on credit. If you are using credit cards to keep up with expenses during slow periods, focus instead on ways to reduce expenses. "Maxing out" your credit cards could negatively impact your credit score, resulting in higher interest rates.5. Explore Alternative Financing Sources.
The current lack of access to loans makes it harder for small businesses to grow. Even though banks are less willing to provide loans, other organizations like nonprofit lenders or state-sponsored business grant programs can provide the capital you need.A damaging admission. I don’t know how we did it. But we did it. Some clients did not get billed for monthly work in April. Sorry about that. So if you see a extra monthly service or your bill is for two months and not reflecting payment, the reason is simple. We did not bill you. Questions please call.
Each year after tax season we take a look at how we can improve our service for our clients. Client centered is the latest buzz word. And it makes a lot of sense. Client-centered focuses on the client's needs, concerns, priorities, and questions. We are doing our best to improve our client communication. Here is what to expect: Improved client communication. Whether it is an updated web site, better email communication from us. Expect to hear from us more often. And we expect you to communicate with us. Our open door policy has served us well for the last 30 years. Have a question? Call us first.
In the next few months we will be publishing three new reports:
What we learned from working with small businesses for the last 30 years.
The last word about small business cash flow.
What every business owner should know about their taxes.
The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, which passed Congress on April 5, 2011, eliminated two recently enacted 1099 reporting requirements that were to take effect in 2012. Repealed was the onerous 1099 requirement for purchases made and rental expenses. Can you say firestorm? That is very good news.
Still on the books, however, are a couple of new 1099 reporting requirements effective for 2011. Specifically if you sell stock or mutual funds, the brokerage or mutual fund company handling the transaction will have to now identity the capital gain or loss for that transaction. In addition if you process more than $20,000 in credit card sales, the credit card processing company will now report the total of credit card sales to both the IRS and you.
I applaud the decision to report the entire capital gain transaction, including the basis and gain or loss on the 1099. We have spent countless time researching cost basis for our clients. Some clients are just baffled about the sale of their security. This requirement is very consumer friendly and certainly will stream line the tax preparation process on this end. Some good did come out of a very bad law.
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