Discussion:Donation of time to charity
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Discussion Forum Index --> Tax Questions --> Donation of time to charity
| 27 December 2006 | |
| A local charity that I am involved in has asked me to do some accounting/bookkeeping work for them. I put in a considerable amount of time. When they asked for a periodic invoice, I considered perhaps using the amount owed to me towards pledges I have made to the charity and membership fees instead of asking them to actually pay me. My questions are for both books that I now keep. 1)I realize I cannot deduct my time donation as a charitable donation, so on my tax return I figure I would not deduct the charitable contribution on Schedule A - and at the same time not include the income that would have been generated had I charged them on my Schedule C. 2)On the charity's books - can I include the dedication pledges and membership fees (and offset it with a debit to accounting fees) or do I just issue myself a credit towards membership fees and dedication - as if the charity wrote off that pledge? Is there anything wrong with what I am proposing to do?
Thanks. | |
| 27 December 2006 | |
| Hold on a second. Even if you did not get paid for the services, you have to include in income what you would have been paid...the fmv of your services. You then take the charitable deduction for the amount that you essentially gave back to the charity. The charity to account for it could write you a check and you endorse it back to them for your pledge. The membership fees are not charitable in nature and are not tax deductible however :) | |
| 27 December 2006 | |
| Number 1 (No deduction for services but out of pocket expense can be itemized). Dedicated pledges seem to be pledges never the less. Sounds like a receivable so far. Membership fees received are income. Fee membership to you gets posted to the membership list. No cash affect. | |
Death&Taxes (talk|edits) said: | 27 December 2006 |
| Next to "Do I have to pay tax on Dad's $12,000 gift?", the question of donated services must be the most asked during tax season, or the other variant, donating fully-written off business equipment that is worth less than original cost. By the way, are these 'membership fees' synagogue dues by some chance? | |
| 27 December 2006 | |
| Jctmstx you seem to be saying what I thought - that I can NOT take a deduction for the amount that I essentially gave back to the charity. Do I then have to pick up the income - even though I told them NOT to pay me? There were no out of pocket expenses - the only thing involved was my time. I did not fully understand the rest of your answer. If you could explain further I would greatly appreciate it.
Death&Taxes - yes they are. Does that impact the answer? | |
Death&Taxes (talk|edits) said: | 27 December 2006 |
| Synagogue dues are deductible, so that in Sandy's example above, you would end with a wash, but will pay self-employment tax on the business income. Funny, I am not Jewish, but perhaps once every other year I find a member of a synagogue who is not aware that the dues, which finance the operations, are deductible. | |
| 27 December 2006 | |
| D&T I am glad you asked me b/c I DID think the membership or dues were deductible, but Sandy had me worried. OK, so the bottom line is that I DO have to include it as income, pay self employement, etc. and then I can deduct the amount I billed for this on Schedule A as charitable contribution? What about the fact that no deduction is allowed for services? | |
Death&Taxes (talk|edits) said: | 27 December 2006 |
| You are not donating services, you are donating receipts. As someone notes above, you can swap checks if you want to see it as it really happens. | |
| 27 December 2006 | |
| Sorry for harping on this, but Publication 526 page 6 specifically states "You cannot deduct as a charitable contribution... 4. The value of your time or services". What makes it a donation of receipts instead of a donation of services? Is it the fact that I am telling them to apply it against dues and dedication pledges? | |
TaxManager (talk|edits) said: | 27 December 2006 |
| I think you need to look at this as "constructive receipt". It is as if the charity paid you for your serivices and then you donated money to them. So if you should have been paid $1,000 you will pick up $1,000 on your Schedule C and pay income & self employment taxes on it. You will then take a $1,000 charitable contribution on your schedule A.
To make things easier you can have the charity just cut you a check for your services and then just write them a check back. That way it is clear cut. I would also have the charity send you a letter affirming your contribution. | |
Death&Taxes (talk|edits) said: | 27 December 2006 |
| Do a step approach: MAS bills synagogue for bookkeeping; synagogue cuts a check and sends it to you. You then record check in your cash receipts book and zero the bill. You have received income; now you either deposit check and write your own in same amount, or endorse check back to synagogue which they will record as a cash donation. If you avoid the check altogether, you still must reflect the collection of your services and pick up the income, and the synagogue must reflect the receipt of the donation, but now you have no real record of the donation to show at tax time. | |
Rgtaxservice (talk|edits) said: | 27 December 2006 |
| "You cannot deduct as a charitable contribution... 4. The value of your time or services"
| |
| 27 December 2006 | |
| Hi sorry another question I just got dizzy over reading all these answers. A simple question desrves a simple answer 1) he knows he cannot deduct services so thats the answer. Anyone above remotely suggesting get a check write a check pay the taxes etc etc should be strung up :) 2) GAAP (from a tax guy (scary) via a GAAP guy)you should book the outside services that are rendered to the charity if you would have normally paid for them with an offsetting accounting expense. Sorry again folks but it must be a slow end of the year for most of us. bye | |
Rgtaxservice (talk|edits) said: | 27 December 2006 |
| I wasn't suggesting paying SE. I was making the point that reporting the transaction as a $$$$ issue would generate tax issues, including SE, which would exceed the orinal amount of the donation. | |
| 28 December 2006 | |
| Rgtaxservice - you seem to be coming from the same point of view as I am. I am still perplexed as to why I would have to show the income and pay self employment tax on a donation of my time! D&T I understand that I could perhaps structure it like that - but dont understand the benefit (or the need) of doing so. WesR thanks for your very simple answer. | |
| 28 December 2006 | |
| Give them a discount and bill them for $100. Happy Holidays!! | |
Death&Taxes (talk|edits) said: | 28 December 2006 |
| Here is what you wrote: "I considered perhaps using the amount owed to me towards pledges I have made to the charity and membership fees instead of asking them to actually pay me." In the next comment, Sandy correctly notes, "Even if you did not get paid for the services, you have to include in income what you would have been paid...the fmv of your services." This is not Pro Bono work. You are settling a debt through what the Service asks about at every audit, Barter. "Did you engage in bartering practices?" You may not call the pledge or membership dues a debt, but to some it is, a moral debt perhaps, but I believe I've read recently of charities trying to force people to meet their pledges and obligations. My talk of checks was only an attempt to show you what is going on; obviously use of checks makes everything needlessly baroque. | |
| 28 December 2006 | |
| Death&Taxes - Thank you for clarifying. You have made the issues very clear and understandable. My exact questions and concerns (that led to my posting a question) have been addressed. Thanks to all of you who have answered - I greatly appreciate your sharing of your knowledge and expertise. | |
| 28 December 2006 | |
| I am treasurer for a number of non-profit ogranizations. I do not charge them, nor do I report any FMV as income. I would use FMV and offsetting contribution if I exchanged my services for fees, but not if I am getting nothing in return. If the organization asks me for a invoice, I explain how thsi transaction would work, and that we both lose. I am doing this because I beleive in the organization, and want to help. (In South Dakota if I do charge them a fee, I have to add sales tax, the only one that comes out ahead is the state and Feds.) If I had to report FMV as income, for everything I did, I would be in big trouble(Whats FMV of responding to these posts?) | |
| 28 December 2006 | |
| PJL - great idea. That was the reasoning behind what I was doing. I think the issue in my question was my idea of possibly using it as a way to fulfill dedication pledges and membership dues. My logic was that my membership dues and dedication pledges are voluntary (nobody requires me to pay them) so it wouldn't be considered bartering - I am donating something without receiving anything in return. Death&Taxes and Sandy disagree. That's why I asked - to understand all the issues involved. Thanks for your input. | |
| 28 December 2006 | |
| Mascpa- only thing to watch....is that I do not get any "credit" for my "contributions of time". There is nothing on the organizations books that I gave anything. Maybe a statement that they did receive donated time that they can't value. If they book a non cash donation, I may change my answer.(need to think about this). | |
Taxguy1024 (talk|edits) said: | 28 December 2006 |
| Maybe I misunderstood here, but it didn't sound to me like what Mascpa was trying to do is the same thing that PJLCPA does. In PJL's case, he was performing services without receiving anything in return. In Mascpa's case, you're trying to get "credit" for something in exchange for the services you perform....and I think that changes things..... | |
| 28 December 2006 | |
| Taxguy - I agree - that was my point in my post above. Thanks everyone for answering the question. | |
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