Charitable deductions are not just about giving money.

Here is information from IRS as something they call a "Summertime Tax Tip."


During the summer, some taxpayers may travel because of their involvement with a qualified charity. These traveling taxpayers may be able to lower their taxes.
Here are some tax tips for taxpayers to use when deducting charity-related travel expenses:

• Qualified Charities.  For a taxpayer to deduct costs, they must volunteer for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are generally qualified, and do not need to apply to the IRS. A taxpayer should ask the group about its status before they donate. Taxpayers can also use the Select Check tool on IRS.gov to check a group’s status.
• Out-of-Pocket Expenses.  A taxpayer may be able to deduct some of their costs including travel. These out-of-pocket expenses must be necessary while the taxpayer is away from home. All costs must be:
• Unreimbursed,
• Directly connected with the services,
• Expenses the taxpayer had only because of the services the taxpayer gave, and
• Not personal, living or family expenses.
• Genuine and Substantial Duty.  The charity work the taxpayer is involved with has to be real and substantial throughout the trip. The taxpayer can’t deduct expenses if they only have nominal duties or do not have any duties for significant parts of the trip.
• Value of Time or Service.  A taxpayer can’t deduct the value of their time or services that they give to charity. This includes income lost while the taxpayer serves as an unpaid volunteer for a qualified charity.
• Travel Expenses a Taxpayer Can Deduct.  The types of expenses a taxpayer may be able to deduct include:
• Air, rail and bus transportation,
• Car expenses,
• Lodging costs,
• Cost of meals, and
• Taxi or other transportation costs between the airport or station and their hotel.
• Travel Expenses a Taxpayer Can’t Deduct. Some types of travel do not qualify for a tax deduction. For example, a taxpayer can’t deduct their costs if a significant part of the trip involves recreation or vacation.

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

Want to get angry? Read this Forbes article about Illinois' courts are bankrupting the state by awarding workers compentation awards.

"The commission handling workers’ claims and the courts that supervise it have endlessly expanded the liability of employers, forgetting that the system was supposed to cover only employment-related injuries. One Illinois court held, for example, that a worker was entitled to benefits when he was injured throwing himself up against a vending machine in an attempt to dislodge a stubborn bag of potato chips. The court said that the injured employee was a deserving “Good Samaritan” on a rescue mission to help a fellow co-worker who had deposited the coins. The court thought that the defect in the vending machine “created a need for action to dislodge the bag of Fritos.” (I am not making this up!)


Illinois’ bottomless workers’ compensation system has contributed to the state ranking as one of the most labor-expensive states. In the construction industry, for example, $20 of every $100 of wages goes to workers’ compensation (in neighboring Indiana it’s less than $5). It is perhaps one more reason why the state has lost 300,000 manufacturing jobs since 2000, and why, unlike its Midwest neighbors, it has not enjoyed any manufacturing job growth since the Great Recession.

In the public sector, the effect is even grimmer. State workers file workers’ compensation claims far more often than in any other employment sector, costing more than 4 percent of government payroll. A whopping one third of Illinois state employees have open claims alleging work-related injuries. (Is it really that dangerous to work for the state?) The claimants are often counseled by lawyers, whereas poor Illinois does not have the resources to either defend this Tsunami of claims or pay the insurance premiums.

It is not obvious why the Illinois workers’ compensation system unraveled, but let’s see who benefits from this cash cow. As in any litigation-intensive area, lawyers do well. The paradigm of a litigation-free insurance system is long dead in Illinois, where 52 percent of workers’ compensation claimants—more than in any other state—are represented by an attorney. (In neighboring Wisconsin only 13 percent are represented.) Health care providers also benefit, since the fees for work injury medical treatments are much higher than the fees Medicare pays for the same treatments. But a big part of the blame is on judges. Don't courts realize that dealing out insurance benefits makes premiums more expensive? That such reckless courtroom generosity would drive employers out, and the state’s finances to the ground?"



Read more by clicking on this link. 

Where in the world is the Illinois Department of Revenue Taxpayer Ombudsman? Please sign our petition.

The State of Illinois is in the news again.  "Illinois finances are in massive crisis mode." says comptroller Susana Mendoza.  New court orders to pay medical bills will eat up 100% of the state's revenue she says.  The tax increasing clouds are on the horizon.

 

So you can imagine the State is seeking every dollar it can collect.  In more than 35 years of practice I have never seen the Illinois Department of Revenue as aggressive as it has been in the past few months.  While at the same time more frustrating in its seemingly inability to solve problems in a timely manner.  The Willard Ice Building is a very unhappy place right now.  

 

I had a client come into the office a few weeks ago practically in tears because her deceased husband's business had just been turned over to an attorney for collection by the Illinois Department of Revenue.  This is wrong in so many ways. I guess it was the straw that broke the camel's back.  I had enough.  I am going to write the governor about some of the collection issues we have been happening.  Not just a complaint letter, but one that offered a solution as well.  But first some background.  

 

According to Wikipedia an ombudsman or public advocate is an official, usually appointed by the government or by parliament, but with a significant degree of independence, who is charged with representing the interests of the public by investigating and addressing complaints of maladministration or a violation of rights.

 

As fearful as the IRS is they have a very effective Taxpayer Advocate.  The IRS website says "the Taxpayer Advocate Service (TAS) is your voice at the IRS. We ensure you are treated fairly, and know and understand your rights. If you are having tax problems and have not been able to resolve them with the IRS, you may be eligible for free TAS help. We know this process can be confusing, but the worst thing you can do is nothing at all!"

 

Our neighboring state Kentucky has a tax ombudsman as well.  From the Kentucky website "the Taxpayer Ombudsman is an advocate for Kentucky taxpayers. The mission of the Taxpayer Ombudsman is to instill confidence and integrity in administration of Kentucky's tax laws by ensuring strict adherence to the letter and spirit of the Taxpayer's Bill of Rights."

 

Illinois has one too.  According to regulations on the Illinois Department of Revenue website all such written taxpayer contact shall include the phone number of the Taxpayer Ombudsman.  But somehow, somewhere the office of the Illinois Department of Revenue's Taxpayer Ombudsman doesn't exist.  And the collection notices clients have received to date make no mention to the Taxpayer Ombudsman.

 

Here is my letter to Bruce Rauner:

Bruce Rauner, Governor

Office of the Governor

207 State House

Springfield, IL 62706

 

In 2014 CEO.net ranked Illinois as one of the three worst states to do business in. Here is one comment from CEO.net, "Illinois is rated in the worst category; their taxing scheme is deleterious (harmful) toward small business.The Illinois Dept of Revenue seems most adversarial with respect to small business support and promotion."

 

As a Springfield based accountant for very small business I can tell you that things have gone from bad to worse at the Department.

 

Here are four examples:

 

A few weeks ago a client stopped by our office just in tears.  Her deceased husband's business had been turned over to an attorney for collection of a past due balance tax account by the Illinois Department of Revenue.  Does she have to pay the bill?  

 

A client who was a victim of identity whose social security number was used to obtain a sales tax number in the 1980's have their refund of $544.00 applied to a 1989 sales tax liability that she doesn't owe, never incurred and is not liable for. Ironically the notice issued by the Department directing the client to call the "phone number below for the location your overpayment was applied"…..has no telephone number.  By the way when we contacted the Department, the obviously burdened and frustrated employee recommended that the only way to clear up the matter was to have our representative intervene.  Otherwise it would take at least four to six months to process our inquiry.

 

A client made a mistake in reporting his payroll tax wages and liabilities.  Our office prepared the necessary amended payroll forms and filed them with both the Internal Revenue Service and the Illinois Department of Revenue.  No problems with the Internal Revenue Service.  The returns were accepted as filed. Not so with the Illinois Department of Revenue.  The Department rejected our amended returns based on our failure to include corrected W-2 forms.  Of course we did include the forms.  No explanation of what happened to them after they reached the Department for processing.

 

A single parent of two children just had his bank account levied by the Illinois Department of Revenue in the amount of $200.00 to meet his past due liability. I can understand that the state is knee deep in serious financial difficulties, and should collect every dollar owed. But $200.00 is not going to make much of a difference in things in the long run.  I can assure you that the $200.00 makes all the difference to this struggling taxpayer.  Common sense should prevail in all enforced collection issues.  It appears that the chase for tax dollars is lacking a very humane approach by the Department.

 

We can do better.  I read with interest your "Cutting the Red Tape" initiative. Good start on what may be Mission Impossible in the State of Illinois.  Still solutions to the day to day problems listed above should not be the sole responsibility of our State Representative. No one is acting as an ombudsmen at the Illinois Department of Revenue to help taxpayers such as the Taxpayer Advocate Service does with the Internal Revenue Service.

 

Ironically the Department regulations make reference to a "Taxpayer Ombudsman."  I have quoted below from Title 86, Section 205.20 Illinois Department of Revenue Regulations.

 

Department Responsibilities

 

The Department of Revenue shall have the following powers and duties to protect the rights of

Taxpayers:

 

1. To furnish each taxpayer with a written statement of rights whenever such taxpayer

receives a protestable notice, a bill, a claim denial or reduction regarding any tax. Such

statement shall explain the rights of such person and the obligations of the Department

during the audit, appeals, refund and collections processes. All such written taxpayer

contact shall include the phone number of the Taxpayer Ombudsman.

(Section 4 of the Act).

Restoring the office of "Taxpayer Ombudsman" is a good start.  

 

Thank you for your prompt response.

Signature Donald C. Fuener

 

Here is the response I received from the Governor:

 

I posted a link here.

 

Not much of a response.  A form letter?  Really?

 

But I am not going to take this sitting down.  I have to ask you a favor. Maybe if we can show that there is more than a little old tax guy interested in restoring the office of the Taxpayer Ombudsman we can move the Governor off center.  You never know, you may just need some help some day.

 

Take a moment to sign our online petition asking Governor Rauner to restore the office of Taxpayer Ombudsman.

 

Here is the link to the online petition.

 

Thank you in advance.  Let's see what happens next.

Where is the Illinois Department of Revenue Taxpayer Ombudsman hiding? Our responde from Governor Rauner

Here is the form letter response to our letter requesting the restoration of the Taxpayer Ombudsman.

Where is the Illinois Department of Revenue Taxpayer Ombudsman hiding? Our letter to Illinois Governor Bruce Rauner

Bruce Rauner, Governor

Office of the Governor

207 State House

Springfield, IL 62706

Dear Governor Rauner,

In 2014 CEO.net ranked Illinois as one of the three worst states to do business in.  Here is one comment from CEO.net, “Illinois is rated in the worst category; their taxing scheme is deleterious (harmful) toward small business.The Illinois Dept of Revenue seems most adversarial with respect to small business support and promotion.”

As a Springfield based accountant for very small business I can tell you that things have gone from bad to worse at the Department.

Here are four examples:

A few weeks ago a client stopped by our office just in tears.  Her deceased husband’s business had been turned over to an attorney for collection of a past due balance tax account by the Illinois Department of Revenue.  Does she have to pay the bill?  He died two years ago.  The Department is aware of the death. We attached a death certificate to a previous notice. Why didn’t the Department file a claim against the taxpayer’s estate?  Why didn’t someone associate the dead taxpayer to the accountant forwarded to the attorney for collection.

A client who was a victim of identity fraud, whose social security number was used to obtain a sales tax number in the 1980’s, had her refund of $544.00 applied to a 1989 sales tax liability that she doesn’t owe, never incurred and is not liable for. Ironically the notice issued by the Department directing the client to call the “phone number below for the location your overpayment was applied”…..has no telephone number.  By the way when we contacted the Department, the obviously burdened and frustrated employee, recommended that the only way to clear up the matter was to have our State Representative intervene.  Otherwise it would take at least four to six months to review our inquiry.

A client made a mistake in reporting his payroll tax wages and liabilities.  Our office prepared the necessary amended payroll forms and filed them with both the Internal Revenue Service and the Illinois Department of Revenue.  No problems with the Internal Revenue Service.  The returns were accepted as filed. Not so with the Illinois Department of Revenue.  The Department rejected our amended returns based on our failure to include corrected W-2 forms.  Of course we did include the forms.  No explanation of what happened to them after they reached the Department for processing.

A single parent of two children just had his bank account levied by the Illinois Department of Revenue in the amount of $200.00 to meet his past due liability. I can understand that the state is knee deep in serious financial difficulties, and should collect every dollar owed. But $200.00 is not going to make much of a difference in things in the long run.  I can assure you that the $200.00 makes all the difference to this struggling taxpayer.  Common sense should prevail in all enforced collection issues.  It appears that the chase for tax dollars is clouding the Department’s judgement. Oh and this just in.  I spoke with a client this morning who told me that the Illinois Department of Revenue has levied his bank account for $38.00.  In this case the taxpayer does not owe the State any money.  We are bogged down with the inability of the Department to process any type of amended return or claim for refund efficiently and accurately.   

We can do better.

I read with interest your “Cutting the Red Tape” initiative. Good start on what may be Mission Impossible in the State of Illinois.  Still solutions to the day to day problems such the ones I listed above,  should not be the sole responsibility of our State Representative to solve. No one is acting as an ombudsmen at the Illinois Department of Revenue to help taxpayers such as the Taxpayer Advocate Service does with the Internal Revenue Service.

Ironically the Department regulations make reference to a “Taxpayer Ombudsman.”  I have quoted below from Title 86, Section 205.20 Illinois Department of Revenue Regulations.

Department Responsibilities

The Department of Revenue shall have the following powers and duties to protect the rights of

Taxpayers:

1. To furnish each taxpayer with a written statement of rights whenever such taxpayer

receives a protestable notice, a bill, a claim denial or reduction regarding any tax. Such

statement shall explain the rights of such person and the obligations of the Department

during the audit, appeals, refund and collections processes. All such written taxpayer

contact shall include the phone number of the Taxpayer Ombudsman.

(Section 4 of the Act).

Restoring the office of “Taxpayer Ombudsman” is a good start.  

Thank you for your prompt response.

Donald C. Fuener E.A.

President

Cc:  Sara Wojcicki Jimenez

A Short History of Tax Cuts and We Have Enough of the Illinois Department of Revenue. Exerpts From Our May 1, 2017 Newsletter

“You can’t be for big government, big taxes, and big bureaucracy and still be for the little guy.” – Ronald Reagan

Tax cuts are in the news again.  Back in 1981, when I was just a young tax geek, then president Ronald Reagan, presided over the biggest tax cut in U.S. history -- equivalent to 2.9 percent of GDP -- when he cut the top individual tax rate from 70 percent to 50 percent in 1981, right after taking office. In 1981 the economy was just a mess. Stagnant I think is the term. Much like today. However back then the inflation rate was 13.55% and a 30 year fixed mortgage would cost you 15.45%. Just imagine qualifying for a mortgage back then. I couldn’t.  The light at the end of the tunnel was a train coming this way.

Reagan soon discovered that revenue needed to be increased.  More than half of the bill's changes, including faster write-offs for businesses and a credit on investments, were subsequently undone.  According to CBS news “the most durable effect of the 1981 cuts was to lay the groundwork for a tax reform in 1986, which was intended not to raise revenue but to clean up the tax code. In the century-old history of the income tax, the 1986 effort gets high marks from left and right alike as the only substantial effort to streamline the tax code.

"That was the last remotely aggressive effort to pare back loopholes," said Matthew Gardner, senior fellow at the Institute on Taxation and Economic Policy. "Since then we've had a gradual but continual increase in the number of loopholes."

As part of the deal, capital gains, which for most of U.S. history have been taxed at relatively low rates, were treated as ordinary income; the number of tax brackets was reduced; many tax shelters were eliminated and tax rates overall were cut.

How did the 1986 cut affect the economy? GDP did pick up over the next two years, before slamming into a wall during the 1990-91 recession. Bill Clinton would go on to raise taxes to close the growing deficit. Some economists blame the tax cut for contributing to the late-80s real estate crash, and the recession, by making it less attractive to invest in real estate. (Donald Trump made the same charge in 1991). Others say there's no connection.”

The 12 bullet point memo released last week proposes a 15% business tax rate.  I assume that would cover us small business owners, as well as, very large businesses. This is a very good thing.  The Financial Samurai writes “For anybody who has ever made money, you know that paying tax on your income is one of your largest ongoing lifetime expenses. A progressive tax system that taxed my income at a Federal + State marginal rate of over 50% during the Obama years was one of the catalysts for negotiating my severance and leaving the workforce for good in 2012. It didn’t feel worthwhile anymore to work 60-70 hours a week and go through so much stress for the privilege of paying the government more than I kept.

What’s even more amazing is that the vast majority of Americans save LESS than their effective tax rate! Can you imagine being taxed at a 20% effective rate when you can only save 6% of your after tax income? No wonder why so many people can’t escape the Matrix.”

Two final points from the Cato Institute to consider:

1. In a free country, money belongs to the people who earn it. The most fundamental reason to cut taxes is an understanding that wealth doesn’t just happen, it has to be produced. And those who produce it have a right to keep it. We may agree to give up a portion of the wealth we create in order to pay for such public goods as national defense and a system of justice. But we don’t give the government an unlimited claim on our money to use as it sees fit.

2. Private individuals and businesses use money more efficiently than governments do. People with their own money at risk spend or invest it carefully. You don’t find many $600 hammers or insolvent retirement programs in the private sector. Money will do more good for more people in private hands than in government hands.

Two weeks ago a client stopped by our office just in tears.  Her deceased husband’s business had been turned over to an attorney for collection of a past due balance tax account by the Illinois Department of Revenue.  Does she have to pay the bill?

In 2014 CEO.net ranked Illinois as one of the three worst states to do business in.  Here is one comment from CEO.net, “Illinois is rated in the worst category; their taxing scheme is deleterious (harmful) toward small business.The Illinois Dept of Revenue seems most adversarial with respect to small business support and promotion.

Next month we will write to you about our answer. In short no. We will explain why. And more importantly our reaction to what happened and what you can do to help us.

Tax Benefits for Higher Education Expense

Check Out Tax Benefits for Higher Education  

Higher education costs paid in 2016 can mean tax savings when taxpayers file their tax returns. If taxpayers, their spouses or their dependents took post-high school coursework last year, they may be eligible for a tax credit or deduction.
Here are some facts from the IRS about tax benefits for higher education.
For 2016, there are two tax credits available to help taxpayers offset the costs of higher education. The American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of income tax owed. Use Form 8863 to claim the education credits.
The American Opportunity Credit (AOC) is:

• Worth a maximum benefit up to $2,500 per eligible student.
• Only for the first four years at an eligible college or vocational school.
• For students pursuing a degree or other recognized education credential.
• For students enrolled at least half time for at least one academic period during 2016. Taxpayers can claim the AOC for a student enrolled in the first three months of 2017 as long as they paid qualified expenses in 2016.

The Lifetime Learning Credit (LLC) is:

• Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify.
• Available for all years of postsecondary education and for courses to acquire or improve job skills.
• Available for an unlimited number of tax years

The tuition and fees deduction can reduce the amount of income subject to tax. This deduction may be beneficial for taxpayers who don't qualify for the American Opportunity Credit or the Lifetime Learning Credit. Use Form 8917 to claim the tuition and fees deduction.
The Tuition and Fees Deduction is:

• Worth a maximum benefit up to $4,000,
• Claimed as an adjustment to income,
• Available even if a taxpayer doesn’t itemize deductions on Schedule A,
• Limited to tuition and certain related expenses required for enrollment or attendance at eligible postsecondary educational institutions.

Additionally:

• Beginning in 2016, to be eligible for an education benefit, a student is required to have Form 1098-T, Tuition Statement. They receive this form from the school they attended. There are exceptions for some students. See Publication 970 for more details.
• They may only claim qualifying expenses paid in 2016.
• They can’t claim either credit if someone else claims them as a dependent.
• They can’t claim either AOTC or LLC and the Tuition and Fees Deduction for the same student or for the same expense in the same year.
• Income limits could reduce the amount of credits or deductions they can claim.
• The Interactive Tax Assistant tool on IRS.gov can help check eligibility.

IRS Free File. Taxpayers can use IRS Free File to prepare and e-file their federal tax returns for free. File Form 8863, Education Credits, with your Form 1040. Free File is only available at IRS.gov/freefile.
The IRS reminds students using the Free Application for Federal Student Aid (FAFSA) that the IRS Data Retrieval Tool currently is unavailable.  This does not limit an individual’s ability to apply for aid. Applicants can manually provide their tax return information. The IRS offers alternatives for the retrieval of the income information needed.
Additional IRS Resources:

• Tax Benefits for Education: Information Center
• Education Credits--AOTC and LLC
• American Opportunity Tax Credit
• Lifetime Learning Credit
• American Opportunity Tax Credit: Questions and Answers

Share this tip on social media -- Check Out Tax Benefits for Higher Education.  https://go.usa.gov/xXCFm#IRS

Source IRS email Tax tip 2017-31