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IRS Newswire posted some new information regarding donations to Haiti, in case you are interested:

WASHINGTON — People who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season, according to the Internal Revenue Service.

Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card.

“Americans have opened their hearts to help those affected by the Haiti earthquake,” said IRS Commissioner Doug Shulman.” This new law provides an immediate tax benefit for the many taxpayers who have made generous donations.”

Taxpayers can benefit from their donations, almost immediately, by filing their 2009 returns early, filing electronically and choosing direct deposit. Refunds take as few as ten days and can be directly deposited into a savings, checking or brokerage account, or used to purchase Series I U.S. savings bonds.

The new law only applies to cash (as opposed to property) contributions. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both.

To get a tax benefit, taxpayers must itemize their deductions on Schedule A. Those who claim the standard deduction, including all short-form filers, are not eligible.

Taxpayers should be sure their contributions go to qualified charities. Most organizations eligible to receive tax-deductible donations are listed in a searchable online database available on IRS.gov under Search for Charities. Some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov. Donors can find out more about organizations helping Haitian earthquake victims from agencies such as USAID.

The IRS reminds donors that contributions to foreign organizations generally are not deductible. IRS Publication 526, Charitable Contributions, provides information on making contributions to charities.

Federal law requires that taxpayers keep a record of any deductible donations they make. For donations by text message, a telephone bill will meet the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution and the amount of the contribution. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check, or a receipt from the charity showing the name of the charity and the date and amount of the contribution. Publication 526 has further details on the recordkeeping rules for cash contributions.

This year’s special Haiti relief provision is modeled on a 2005 law that, in the wake of the Dec. 26, 2004, Indian Ocean tsunami, allowed taxpayers to deduct donations they made during January 2005 as if they made the donations in 2004.

Remember to use E-File Magic for all your 1098, 1099, 5498 and W-2G Forms. Download our 1099 Software now!

My heart goes out to all the victims and their families involved with the Earthquake that occurred in Haiti earlier this week. The television and internet are flooded with organizations committed to providing support for those in need. Your donations may be tax deductible – however you need to be sure the organization you are giving money to is in fact a qualified charity. This is what the IRS webpage says about your charitable donations:

Contributions to domestic, tax-exempt, charitable organizations that provide assistance to individuals in foreign lands qualify as tax-deductible contributions for federal income tax purposes, provided that the U.S. organization has full control and discretion over the uses of such funds. Contributions to foreign organizations generally are not deductible. Contributions to benefit specific individuals or families are also not deductible.

Contributions are deductible in the year made. To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions.

IRS Publication 526, Charitable Contributions, provides information on making contributions to charities. Pub. 3833, Disaster Relief: Providing Assistance through Charitable Organizations, explains how the public can use charitable organizations to help victims of disasters

Donors should ensure that their contributions go to qualified charities. Taxpayers who have a specific charity in mind can make sure it’s a qualified charity by doing a search on IRS.gov. Some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov.

E-File Magic’s Print and Mail Order Deadline for Tax Year 2009 is January 18, 2010. Download the Free 1099 Software now to get started!

Gina’s Tax Tips posted a blog Wednesday on 1099s - not very often I see this so I am celebrating by re-posting it here.

Business owners and landlords are required to give a Form 1099-MISC to any service provider (independent contractor) you paid $600 or more for services provided to your business (or rental property) during the year.  It’s also advisable if you are claiming the home office deduction to provide a Form 1099 to anyone who provided a home service that you intend on claiming as an expense as part of your home office deduction.  The deadline is January 31.

In general if your service provider is a corporate entity then you do not have to send them a Form 1099.  The main exception is attorneys.  No matter what type of entity your attorney happens to practice under you are required to send them a Form 1099 for the services they provide to your business, rental property or home office.

The main benefit of preparing Form 1099s is that it protects your business, rental and/or home office tax deduction. If you fail to prepare a required Form 1099 and later get audited, your deduction of the fees paid to the service provider will most likely be disallowed.  This means additional taxes, interest and penalties.

Please note….Form 1099 cannot be used for workers who should properly be treated as your employees (this includes household employees – please see IRS Publication 926). You must provide them with a Form W-2 instead.

A new year means a starting over in keeping track of certain records such as medical expenses. Here is a cute story just posted by TaxGirl  on her website www.taxgirl.com about her recent adventures with her daughter. Within this story she has a link to medical expenses you can deduct (it’s quite long).

Those of you who follow me on Twitter (or in real life) know that one of my children has been sick for about a month. My middle child, Amy, has a form of vasculitis known as Henoch-Schonlein Purpura. It is a nasty and invasive – but fortunately not contagious – illness that attacks the joints and blood vessels in your body. The result is a horrific rash (you can Google it to see – I thought about posting an actual photo but it is really not a pretty sight), occasional fever and vomiting, swelling of the joints (sometime to the point of her not being able to walk) and blood in the urine. Again, not pretty. And not fun for a five year old.

We have been lucky in that, save for an experiment with raw milk gone awry, our children have been mostly healthy. I can’t imagine what it is like to have a child with a serious, long-term illness.

One of the things that I have learned over the last few weeks is how quickly medical expenses can add up – and I have good insurance. I have written post after post about what you can deduct in medical expenses but have rarely been in the position to take my own advice. My oldest daughter spent the first few days of her life in the NICU at Children’s Hospital of Philadelphia (CHOP); my youngest two have had minor surgeries (tonsils and adenoids); and my little boy – all boy – has seen to it that I’ve seen the inside of the ER (stitches at 2!). But those things were more or less one or two trip events.

With Amy and HSP, we’ve found ourselves driving back and forth to the doctor several times a week for testing – and once to CHOP to have the specialists in nephrology check out her kidneys. And the expenses are adding up. I thought it would be a good time to revisit the idea of medical expenses and what things are deductible… for me and for my readers.

I’m actually framing this post in terms of things I can deduct with respect to my daughter’s illness. If you’re looking for something more comprehensive, there is a more extensive list of medical expenses which may qualify for a deduction here.

A couple of quick things out of the way first: 1, Amy is my qualifying dependent so I can deduct medical expenses paid on her behalf and 2, I understand that I can only deduct those expenses which exceed 7.5% of my adjusted gross income (AGI).

So what can I deduct?

Co-pays. We have decent medical insurance but we are still subject to co-pays. I pay $20/visit to the doctor (a few of those trips this month) and $100/visit for the ER (one of those trips just last week when her labs came back with blood in her urine and an elevated white blood cell count).

Lab fees. My insurance covers some of our lab fees, but not all. She’s had several tubes of blood work and many cups of urine (four of those in one day last week) analyzed for protein counts, white blood cell counts and other abnormalities. Those fees not covered by our insurance, those that we pay out of pocket, are deductible.

Transportation costs. Luckily, my pediatrician’s office is walking distance from my house (about 2.5 miles) but in really cold or snowy weather, we’ll take the bus or drive. The bus fare is deductible – as is the mileage to and from the doctor. The standard medical mileage rate for 2009 is 24 cents per mile. Yes, I could also take the actual expenses associated with driving but I’m just not that organized at times like these.

CHOP is in the city, so we generally take a bus, train or drive to the hospital. The bus fare, train fare or car mileage is deductible.

Also deductible? The ridiculous cost of parking in the city.

And if I lived in New Jersey (shudder) and had to pay the toll to come into the city, that would also be deductible.

Lucky for us (and my record keeping), parking fees and tolls are deductible regardless of whether we use the actual expenses method or the standard medical mileage rate.

Even though I’m tagging along with Amy, the cost of my transportation is also deductible, since transportation expenses of a parent who must go with a child who needs medical care are deductible. My friends who often go with me for moral support to these things? Much appreciated, but not deductible.

We didn’t have to stay overnight (thank goodness) but if we had, we could deduct up to $50 for each night per person. My expenses would have been covered for same reason my transportation would have been included (because I’m the mom) – but only to $50. You and I both know that I couldn’t stay anywhere in Philadelphia that wouldn’t cause my mother to cry for $50… Considering that the best medical facilities for children, like Children’s Hospital of Philadelphia and Children’s Hospital of Boston, tend to be located in metropolitan areas, you’d think that those numbers would push up a little higher (Congress, a little help on this one, please?).

Thankfully, we don’t need any longer term options – like retrofitting our house with ramps, etc. Amy is a little gimpy now but the prognosis is 100% back to normal. But for parents who have to make accommodations or renovations in their home for sick or disabled children, it’s deductible.

So, what can’t I deduct?

The cost of child care. I have two other children that I did not relish dragging with me to the pediatrician, or to CHOP for goodness knows how long. I am lucky in that we have fabulous friends who were willing to watch my children while my husband and I went to the hospital with Amy. But if that didn’t happen, I would have had to get a babysitter. Believe it or not, that’s not deductible as a child care expense. You cannot deduct the cost of child care, even if it enables you, your spouse, or your dependent to get medical treatment.

Our meals. Since we were at the hospital for most of the day, my husband and I missed lunch. Can we deduct the cost of the munchies that we ended up getting from the hospital snack shop? Sadly, no. You can’t deduct the cost of meals that are not part of inpatient care.

Over the counter medicines. The doctor has recommended – but not prescribed – a number of over the counter medicines to keep Amy’s symptoms at bay. Despite the fact that some of them can run $10/bottle (have you seen the cost of children’s Motrin lately?), they’re not deductible. Except for insulin, you cannot deduct the cost of medicines that are not prescribed.

Personal care products. Amy is also using a number of products that don’t qualify as medicines but are part of keeping her comfortable. She has an itchy, scabby rash all over her body and I mean all over her body. She cries sometimes when she changes clothes and the rash keeps her up for hours and hours (two nights ago, we were up until 5am). Oatmeal baths and certain lotions are quite soothing for her. But since they’re not prescription-based, we can’t deduct them.

A lesson to be learned here? If the costs of these treatments are substantial, you may be able to deduct them by having your doctor write a prescription for them. This varies by drug and by doctor.

Another lesson learned? Many of these expenses may not be deductible as medical expenses but would have been considered “reimbursable items” for purposes of flexible spending accounts (FSA) and health flexible spending accounts (HSA). This is because these expenses are for medical purposes and not for every day or cosmetic use. There are limits and restrictions on these accounts – be sure that you understand them – as well as rules with respect to whether reimbursements may be taxable. So, not a panacea, but definitely worth checking out.

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The last 23 days have been really difficult. I know that we are super lucky because the outlook for Amy is 100% recovery. Not all parents have that outcome. And as a mom, my heart goes out to them.

When children get sick, it can take quite a toll on a family. In addition to all of the worries and practical considerations, it can be quite expensive. Fortunately, with a little bit of tax planning, you can mitigate some of the expense and focus on what really matters: getting those kids better.

Happy New Year from E-File Magic. For all your 1099 needs check out our FREE Software!

The Tax Foundation Blog posted the following article January 2, 2010 on Washington D.C.’s newest tax for plastic bags in an effort to reduce litter. D.C. is calling the tax a fee – This is what The Tax Foundation says about it:

Starting yesterday, shoppers in D.C. must pay a nickel for each plastic bag they receive at businesses that sell food and alcohol. The D.C. city government has launched a campaign to make people aware of the new tax on plastic bags, which they sometimes call a “fee”:

Beginning January 1, 2010, District businesses that sell food or alcohol must charge you 5 cents for each disposable paper or plastic carryout bag.

The business keeps 1 cent, or 2 cents if it offers a rebate when you bring your own bag. And the remaining 3 or 4 cents go to the new Anacostia River Protection Fund. DDOE will administer this fund. We will use it to provide reusable bags, educate the public about litter, and clean up the river.

The District has also partnered with CVS/pharmacy to produce and hand out 112,000 reusable bags.

Putting to one side the question of whether a tax on some plastic bags to fund trash cleanup for one area is wise public policy, the new charge is properly called a selective excise tax. The bill may call the charge a fee, but it’s a tax. If it were up to legislatures, few things would be called “taxes,” and loose definitions help deprive taxpayer protection provisions of any meaning.

A fee funds services directed at those who pay it, or pays for regulating their conduct. Taxes produce surplus revenue for general government programs. Since the latter is what is happening here (most of the trash in the Anacostia is not plastic bags, and plastic bags pollute other things), it is a tax.

Because American antipathy to taxes is so deeply rooted in our nation’s history, lawmakers often seek to raise revenue in ways to avoid the “tax hiker” label even if it requires calling an obvious tax a “fee.” That’s what’s happening here. These shell games undermine transparency by making it harder for citizens to understand the cost of government.

For tax questions regarding 1098, 1099, 5498 and W-2G Forms – contact E-File Magic today. Download our Free 1099 Software now.