Making Sure Your Donations Are Deductible

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: During the Christmas season I donate money and toys to various organizations. Are these donations tax deductible?

A: Yes, in certain situations charitable donations are tax deductible; however, the situations in which an individual taxpayer may claim a deduction for such donations are relatively limited. As an initial matter, a charitable donation is the donation of money or property to an organization without the actual or anticipated receipt of a benefit. If a donation entitles an individual to merchandise, goods, or services, including admission to a charity ball, theatrical performance, or sporting event, the charitable donation is only that portion of the donation that exceeds the fair market value of the benefit received.

Charitable donations are tax deductible only if the individual taxpayer itemizes his or her deductions and only if the charitable donations were made to an organization that qualifies under Section 170(c) of the Internal Revenue Code. The IRS maintains a searchable database of qualifying organizations that may be accessed at http://apps.irs.gov/app/eos/. Furthermore, the amount of the tax deduction an individual taxpayer may claim for charitable donations in a given year is capped at fifty percent (50%) of the individual’s adjusted gross income. This cap is lowered to thirty percent (30%) of an individual’s adjusted gross income for charitable donations to certain private foundations, veterans’ organizations, fraternal societies, and cemetery organizations.

Finally, most charitable donations must be substantiated. Donations of household items, such as toys, clothes, furniture, and appliances, worth $250.00 or more must be substantiated by a written acknowledgement from the charity receiving the donation. Such acknowledgement must include the name of the charity receiving the donation, the date of the donation, and a reasonably-detailed description of the items donated. Donations of money, regardless of the method of payment or amount, must be substantiated by a bank record or a written acknowledgement from the charity receiving the donation. Cancelled checks and bank, credit union, or credit card statements are generally sufficient to substantiate a donation of money. Due to these substantiation requirements, you should ensure that you obtain a written acknowledgement when you donate cash or significant amounts of property.

The January 1st edition of “The Law” will discuss gift certificates, credit memos and refunds. Questions may be submitted online to thelaw@clarkcampbell-law.com.

Civil Remedies For Worthless Checks

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: My customer’s check bounced, and he won’t return my calls. What can I do to recover?

A Every day in Florida individuals and businesses receive payments for goods or services in the form of “payment instruments”, which include checks, debit card orders and electronic funds transfers. Unfortunately, many of these payments are “worthless”, because they have been dishonored by the drawee banks or credit unions for lack of funds, lack of credit, lack of account, or the maker has stopped payment. When a worthless payment is issued, and the maker refuses to issue a good check or make payment in another form, Florida law provides the payee with civil remedies that allow the payee to recover from the maker the amount of payment, bank fees and service charges. This article focuses on worthless checks, although the civil remedies discussed also apply to other “payment instruments”.

The payee of a worthless or “bounced” check is entitled to demand and receive from the maker the full amount (i.e., the face amount) of the worthless check, along with any bank fees incurred and a service charge. The payee must first send a written demand by certified mail that notifies the maker that the check was dishonored, lists the full amount owed, and that states the maker must pay the full amount owed in cash within 30 days from the date of receipt of the letter. If, after 30 days, the maker has not paid the payee the entire amount owed, the payee then may file a civil suit against the maker and seek three times the amount of the worthless check, plus bank fees and service charges, court costs, and reasonable attorney fees.

Because of the expense, and uncertain outcome of civil actions, including the possibility of an uncollectable judgment, payees should take the following precautions when issued a check, not only to ensure the check is valid, but also to ensure recovery from the maker if the check is dishonored. First, the payee should always confirm the full legal name and home address of the maker of the check through a government issued form of identification. Second, a payee should never accept a check that is post-dated or has no date on it since that may prevent criminal prosecution if the check is dishonored. Finally, a payee should never accept checks from third parties if the identity of the maker or whether the check was stolen or forged cannot be immediately confirmed.

The December 18th edition of “The Law” will discuss end-of-year tax issues. Questions may be submitted online to thelaw@clarkcampbell-law.com.