Discussion:Clothing Donations
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Discussion Forum Index --> Basic Tax Questions --> Clothing Donations
Discussion Forum Index --> Tax Questions --> Clothing Donations
| 5 March 2009 | |
| Let's say client brings a receipt from Salavation Army showing 5 bags of clothing in good condition. Since most of these clients don't know the FMV of items or in a lot of cases what they actually donated, in the past I would just estimate each bag to be worth $100. I am curious to know if anybody else handle clothing donations this way? or would you simply not take a charity deduction? | |
| 5 March 2009 | |
| I don't ever suggest or put a number on a tax return that comes anywhere but from the taxpayer or their documentation. If they don't know how to estimate and document their basis and thrift-shop value I tell them they really don't have anything to claim. Our firm probably loses business to other preparers that quote "safe" numbers for cash giving, un-reimbursed employee expenses, non-cash charity, etc. So be it... | |
Seaside CPA (talk|edits) said: | 5 March 2009 |
| I would let them come up with the amount to deduct. | |
| 6 March 2009 | |
| I refer them to the various valuation pages on the Salvation Army or Goodwill web sites. That's usually an eye-opener for them. I absolutely refuse to assign values to items myself, and give them the option of assigning a value, or forgoing the deduction. I also have been telling them for several years, that they need to attach a list of what was donated to the receipt, or at least jot some notes on the receipt, and I point out that the IRS reserves the right to ask for such information. | |
TheTinCook (talk|edits) said: | 6 March 2009 |
| I've used HR Block deduction pro in the past a couple of times for those values. Usually I just use what the client gives me after explaining the rules. Also the hairy eyeball comes in handy if they seem to be inflating their numbers. | |
| 6 March 2009 | |
| I do not value the items. I have told my clients ahead of time that it is the responsibility of the charity to put a value on the receipt and if it is not there I cannot put the donation on their return. taxea | |
Taxalmancer (talk|edits) said: | 6 March 2009 |
| Isn't the deduction limited to the amount the Salvation Army sells the clothing for regardless of "FMV"? | |
| 6 March 2009 | |
| Do what Ww said above and use the websites. They give you a detailed breakdown of the items and their value. What I do is print copies of these and let the client determine how much they gave and the value, this way it is in their handwritting and I retain that copy from them in their folder. | |
Death&Taxes (talk|edits) said: | 6 March 2009 |
| I bought pads of these valuation sheets and sent them out with my year end letter in 2007; every so often I get one back filled in. That makes me happy. This year my letter contained the story of the Goldman Sachs female executive in NYC and her 100K donation of clothing. I also threw in a discussion of that case on church donations where even IRS conceded that they tithed, but the tax court threw out the donations. Little things like this make a difference.
When they hand me the 'card' receipts from Purple Heart etc, I tell them that without detail, IRS is permitted to disallow any donation of the sort. | |
| 6 March 2009 | |
| Thank you all! I've officially changed the way we are handling these donations now as a result of this forum. I am all for doing everything the right way.. but after working for a number of firms, it appeared that it's simply a common practice to estimate clothing donations for the preparer. Thanks again. | |
| 6 March 2009 | |
| Nybkcpa re your last post...that is the way it was done until the IRS tightened up the rules. taxea | |
| March 6, 2009 | |
| Taxea - The goodwill stores in my area (and most likely all areas in the country) do not enter any amounts on the receipts. It's not their responsibility (and I'm positive they don't have the time to calculate the FMV of bags and bags of clothing when they're dropped off). I believe the IRS will accept reasonable estimates of the FMVs for clothing and household items, so I never ignore goodwill receipts and always allow the clients to give me their reasonable estimates of the fair market values. | |
| 6 March 2009 | |
| Deback - so what's a reasonable estimate? who knows what's in those bags? So, I guess my question is would IRS accept a piece of paper from a taxpayer listing donated items w/ approx. FMV ? | |
| March 6, 2009 | |
| Yes, I'm sure the IRS will accept a piece of paper listing donated items, if the amounts are reasonable and close to yard sale prices. There are goodwill stores around here that have told people they estimate the FMV of a large bag to be $90 (or was it $95?). I use what clients tell me, and if they don't know, I'll suggest $90 per bag (if they're large and full bags). When I fill in the cost field, I just multiply the thrift value by five. And enter Various for the dates bought and dates donated. | |
| 7 March 2009 | |
| Deback - based on what I am reading, it appears that suggesting an amount for a bag ("if large and full") is not acceptable. I believe the charity now supposed to provide an acknowledgment if the donation is between $250-$500 with description of property and then taxpayer must determine a value using some kind of acceptable method. | |
| 7 March 2009 | |
| I tell the client that there is no way I can help them estimate because I don't know what they gave (and in what condition).
There are two resources I suggest for my clients. One is a written publication called "Money for Your Used Clothing" which can be purchased online. If you register this book with the publisher, they provide an IRS Audit Guarantee. The second resource is online at: www.itsdeductibleonline.com (which is offered free of charge by Intuit). I also have encouraged my clients to take pictures. | |
| March 7, 2009 | |
| Actually, I lied when I said I'll suggest $90 per bag. I never tell clients the amount to deduct, but when they bring up the fact that some goodwill stores suggest an amount per bag, then I'll agree that I've heard the same thing. I also tell clients I can't determine the value of the goods they gave, and I let them determine the value. | |
| 7 March 2009 | |
| I question a lot of the younger clients when they come in with three or four hundred dollars worth of underwear donated, knowing full well that most of the young heathens don't even wear underwear. However, last year I got the shock of my life. I was handling a rich society matron, and trying to maximize her deductions. I inquired "Madam, surely you donated some of your undergarments to charity." To which she "showed me rather than told me", in no uncertain terms, that her most valuable real estate was left open to the fresh air. A lot of it depends on what's fashionable in Paris in any given year, and I can't keep up with it anymore. | |
| 7 March 2009 | |
| Crow - how do you know that "most of young heathens don't even wear underwear?" :-) | |
| 7 March 2009 | |
| That learned that on MTV, or at the tatoo parlor. One of them 'splained to me they don't have to worry about dirty underwear in the emergency room if they don't wear none. Plus, it allows them to get with their foolishness on the fly, so they say. | |
| 7 March 2009 | |
| I'd ask them to prove it. Just like I ask to see their mileage logs. | |
| 7 March 2009 | |
| really? I've never done that. I thought we are tax preparers, not auditors. | |
| 7 March 2009 | |
| well, if you're gonna check for underwear, you ought to check for mileage logs.
otherwise they start to doubt your professionalism | |
| 7 March 2009 | |
| Taxalmancer you are thinking of the rules for a car. I don't think they have done this with clothing or household items.
I don't ask them to prove it. That is between them and the IRS. I also will not put a figure on the return for them.taxea | |
| 7 March 2009 | |
| Kevin, a young trucker came into the tax shoppe one day, and I says to my secretary: "Suzanne, check out this young fellers mileage log." According to her, it started out at about 3 miles, and grew to around 12 hundred before she was through. Course, I'm a usin' round numbers. | |
| 8 March 2009 | |
| I have a suggestion. Two tax seasons ago I started providing a copy of the Salvation Army & Goodwill valuation sheets (off of their websites) to my clients. I ask them to take a digital photo(s) of their donations before they bag or box them up. Then I ask them to get a receipt from the location they are donated to that shows they actually made the donation, which includes the date and quantity of bags/boxes dropped off and a signature.
At the end of the year (if not before or at the time) I ask them to generate a list of the items donated and put a valuation next to each item based off of the provided lists. They just pull out their pictures to see what they donated. I suggest to never go on the high side unless the item was like new or new with tags. Then I tell them to provide the completed list to me all totaled up. Had a police officer do exactly as I suggested. He and his fiance combined houses and sold many of the items at a rummage sale. After the rummage sale, anything that did not sell (from furniture to clothing to miscellaneous) they took photos of, bagged/boxed up and hauled off to the Goodwill. They provide me with receipts and a list of the items totaled up and valued accordingly. They also had a stack of photos all staped together too. Nice and tidy and a very decent deduction was generated from this. Sounds like a lot of work, but believe me, it can add up fast when you do it the honest way. If you figure what the deduction gains you per hour of your time involved, it's a decent "wage" earned for your time. Many of my clients are now using this process and are happy about it. Just a suggestion from what seems to be working where I am. :) Becky | |
| 8 March 2009 | |
| Becky,
Everything sounds good except for taking pictures... I think it's too much. The law doesn't require taxpayers to take any pictures, so why make them do it? I can't imagine asking clients to take pictures of 200 items they've donated. They'll look at me like I am crazy. Perhaps, it's because I am in NY? :) | |
Death&Taxes (talk|edits) said: | 8 March 2009 |
| Clients have done similar things on their own, but, of course, I've told them photos can lie or items can be substituted [I'm playing Mr. IRS here....but I congratulate them for their creative thinking], but what if the amount exceeds $500 and the examiner says 'they look in fair condition, not good condition, so where is your appraisal for that is the rule?' Examiner could go on to say, 'they didn't sell at a rummage sale so how good condition can they be in.'
Have several clients in NYC where Housing Works Thrift Shop shows up on the receipts. One client gives great detail but lists what she paid for them, not the value but she suggests 15% of the original cost, which can be defended. My point is that there is no foolproof method on these items. In the little scenario, can any of you see going above manager level to secure the deduction? | |
| 8 March 2009 | |
| D&T - appraisal is not required unless donation is more than $5,000. | |
Death&Taxes (talk|edits) said: | 8 March 2009 |
| Publication 526, Page 8 explains that to claim a deduction for clothing or household goods not in good or better condition, and over $500, a qualified appraisal must be attached to the return. | |
| 8 March 2009 | |
| D&T please re-read the paragraph on page 8. That is for goods NOT in 'good or better' condition. Like scraps that are worthless except to a museum.
For instance, the shirt that Washington wore while crossing the Delaware is tattered and moth-eaten, but of historical significance (because he slept in it, no doubt, everywhere). It is not in 'good or better' condition, therefore to claim a deduction of more than $500, the donor would require an appraisal. | |
Death&Taxes (talk|edits) said: | 8 March 2009 |
| That IS what I am saying, Kevin. Perhaps I have tons of 1968 garments that have seen the worst of wear and I claim they are worth $800. Or to make them non-historical, I could have forty beat up football uniforms with helmets etc that I claim are worth $600. To get the deduction, I need a qualified appraisal because these are items not in "good used condition or better." When I first read that, I thought 'that is another way to cut down on charity.' | |
| 8 March 2009 | |
| did you ever used to laugh when you told someone your age and they replied 'why, I've got underwear older than you!'?
I think I am now officially that somebody. | |
| 8 March 2009 | |
| D&T. I see your point; but, the Salvation Army here indicates on the receipt that goods are "in good condition", which I thought was one of the requirements. | |
| 8 March 2009 | |
| My point is that once you have this receipt, I don't think anyone can question whether these goods were in good or bad condition and require an appraisal. | |
