Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Apr 19

    Astronomers reassured us we would be safe – this time—but this was “a wakeup call for the importance of defending Earth from future asteroid impacts.” A few weeks ago an asteroid, named 2012 DA14, passed within a hair’s width of the earth. (Astronomically speaking, anyway. 2012 DA14 passed within 17,100 miles of earth at a speed of 17,500 miles per hour.)

    They don’t always miss. Ironically, on the same day that 2012 DA14 streaked by, a meteorite exploded over Chelyabinsk, Russia with the fury of 30 atomic bombs. Amazingly, although 1,200 people were reported injured, no one died.

    But, what if 2012 DA14 hadn’t passed harmlessly by? What would our friends at the IRS have done if 2012 DA14 had struck the earth, with its energy estimated at 200 times the power of “Little Boy” that flattened Hiroshima, Japan?

    It shouldn’t surprise you that the IRS has well-established doomsday plans. Its manual outlines comprehensive continuity planning requirements for all sorts of emergencies, including “natural disasters, accidents, technological failures, workplace violence, and terrorism.” Their goal is to “ensure the continuation of the IRS mission essential functions under all circumstances.”

    So, just what would happen if Washington, or another major city, was taken out by a chunk of space rock? According to the plan, the IRS will resume assessing and collecting taxes within 30 days of the event.

    The manual even suggests taxpayers in the strike zone might get a “Get Out of Jail Free” card “on the premise that the collection of delinquent accounts would be most adversely affected, and in many cases would be impossible in a disaster area.” Of course, outside of the immediate strike zone, “in areas where the taxpaying potential is substantially unimpaired, enforced collection of delinquent taxes will be continued.” Surprise, surprise, surprise!

    If you have damages caused by a meteor strike, or other natural disaster, not reimbursed by insurance (I think there’s an exclusion for meteor strikes on my policy) there are some tax breaks you can take advantage of. Firstly, you’ll have to reduce the amount of your loss by $100. Side note: after Hurricane Katrina, the $100 reduction was waved, and presumably, it could be again. Then your remaining loss can be deducted to the extent it exceeds 10% of your adjusted gross income.

    None of us like paying taxes – certainly not more than we are absolutely required to – but you don’t have to wait for a chunk of space rock to take out your stuff to pay less taxes. The real answer, of course, is planning. If “continuity planning” is the answer for the IRS, then tax planning is the answer for us. Call us before another disaster strikes and see how much you can save.

  • Apr 5

    Based on a mere technicality, the IRS disallowed a deduction for the more than $25,000 David and Veronda Durden contributed to their church. Perhaps the worst part is the Tax Court correctly sided with the IRS, leaving the generous Durdens owing thousands more in taxes.

    The Durdens made their contributions to their church all by checks larger than $250. At the end of the year, the church acknowledged receipt of the $25,171 in contributions and sent them an annualized summary of the donations. They had the cancelled checks, they had the receipts. Everything should be hunky-dory, right? WRONG!

    Unfortunately for the Durdens, the Internal Revenue Code requires that taxpayers substantiate all contributions in excess of $250 by a contemporaneous written acknowledgement which must include all of the following:

    1. The amount of cash contributed and a description (but not the value) of any property other than cash,

    2. Whether the charitable organization provided any goods or services in consideration, and

    3. If any goods or services were received, then the statement must include a good faith estimate of their value. If the donor only received “intangible religious benefits” then it must explicitly state that.

    A statement is considered “contemporaneous” if you receive it before you file the return or the extended due date for filing the return, whichever is earlier.

    The Durdens statement failed to state they only received “intangible religious benefits.” They argued it was only a technicality, that they had “substantively” complied. But alas, neither the IRS nor the Tax Court saw it that way.

    Don’t expect the IRS to be reasonable if you don’t follow the letter of the law. Make sure your religious charitable contribution receipts have this language:

    “You did not receive any goods or services in connection with these contributions other than intangible religious benefits.”