Tag Archives: benefit

IT’S BETTER TO GIVE THAN TO RECEIVE

Since moving to the Mid-Coast area a few years ago, my wife and I have been called upon many times to help a number of local charities. We are very strong believers that it is our obligation to make our community stronger during our brief stay in this wonderful world so we choose to help where we can. We ask all readers to support their favorite local charities as they are the heartbeat of society, making a difference in all of our lives.

Two of our favorites include the Bath YMCA and Big Brothers Big Sisters. For over 150 years, the Bath YMCA has promoted healthy living and provided youth with a safe place to grow. BBBS has been creating nurturing relationships for children facing adversity since 1904. Clearly both organizations make a positive impact on the lives of youth in our area. What they also have in common is that they are both qualified charitable organizations defined under the IRS Code.

As most already know, donations to nonprofit groups like the YMCA and BBBS are tax deductible if you itemize deductions. By definition, a donation is voluntary and is made without getting, or expecting to get, anything in return. To be deductible, a donation must also meet other strict criteria as outlined in IRS Publication 526.

Most of you reading this column have a good handle on what is deductible. Donations to the annual appeal at church, the building fund at the hospital and expenses paid when you volunteer at the museum are all examples. What you cannot deduct are the cost of raffle tickets bought to benefit a charity, the value of your volunteer time, the value of your blood given at the local blood drive, political contributions or the cost of your girl scout cookies. (…sigh)

Donations can get a little sticky when goods or services are received as a result of the contribution. Take for example, the local fundraising silent auction that you pay $1,000 to stay a beach house. If the fair value of that stay is $1,000, you have not made a contribution and no deduction is allowed. If, however, you pay $1,500 for the same stay you could be entitled to a $500 deduction.

For those who think that there is a safe amount that can be deducted be warned, the IRS has many strict rules for deducting charitable contributions. The rule that impacts most people is the requirement that individual contributions of $250 or more be backed with a written acknowledgement from the qualified organization. The acknowledgement must be in your possession before you file your return, include a description of the gift and a statement as to whether you received any goods or services as a result of the contribution.

My wife and I firmly believe that we all have an obligation to give back. Giving back is the life blood for local charities, and the tax deduction feels good too. The next time you attend a charity auction, bid high and bid often.

WHAT DO SUPER BOWL SUNDAY AND TAX RETURNS HAVE IN COMMON?

Other than the time of year they occur, the one shining answer is Fantasy Football Leagues. The popularity of these leagues have forced the IRS and Certified Public Accountants all over the United States to begin asking the question: Are my winnings from these online leagues taxable?

What is Fantasy Football?

Fantasy Football is defined to work in such a way that, according to the NFL, “You decide what type of league you want to participate in, acquire a roster of players (either through a draft or through auto pick assignment), then set your lineup each week during the season and watch as touchdowns, field goals, yards gained, sacks, interceptions and much, much more generate fantasy points for or against your team. Whether you win or lose and climb or fall on the leader board all depends on how well you maximize the talent on your roster each week.”

How Does This Affect My Taxes?

Just like any other sort of income, a determination must be made as to the taxability of such income. Unfortunately, the IRS has not ruled specifically on the treatment of Fantasy Football winnings, but there are options that fall under the treatment of online game-playing tournaments (IRS Letter Ruling 200532025).

What Are The Options?

There are three methods defined by the above mentioned IRS letter ruling and they are as follows:

Option #1: The Gross Method: This method would require the league administrator to report total winnings for the year on a form 1099-MISC when the player wins more than $600.

Option #2: The Net Method: This method requires everything from the Gross Method, but then subtracts any entrance fees paid for the winning contests only, creating a net amount that would be reported on the 1099-MISC. if over $600.

Option #3: The Cumulative Net Method: Taking it one step further from the net method, this method allows all entrance fees to be deducted from the winnings, regardless of winning that contest. If this amount is still over the $600, it will be reported on form 1099-MISC.
What Should You Do Next?

If you feel that this applies to your Fantasy Football League activities, please give Jessica Marin, CPA a call at Perry, Fitts, Boulette & Fitton CPAs and we will help you determine the best way to report on your tax return.