The federal government has decided to be charitable with those who have been charitable.
President Bush signed a bill into law Friday that allows taxpayers the option of deducting tsunami-related donations made before this Jan. 31 on their 2004 or 2005 tax return.
Columbia accountant Tami Benus said the extension could be financially advantageous for people seeking additional deductions on their 2004 tax returns.
“Maybe you are a few hundred dollars from being able to itemize; this may be a good time to go ahead and donate $200 or $300 to tsunami relief so you can itemize and have a better tax break in 2004,” Benus said. “That’s going to be something that I think you will want to sit down with your CPA and look at, your numbers for 2004 and your projections for 2005, and see where you would be better off taking a deduction.”
The bill was proposed Jan. 4 by Sens. Max Baucus, D-Mont., and Chuck Grassley, R-Iowa. The proposal came a day after President Bush called on former Presidents Bill Clinton and George H.W. Bush to raise money for disaster relief in Southeast Asia.
Under previous law, taxpayers would have had to wait until 2006 to deduct tsunami-related donations made in 2005.
CPA Garry Weiss of Landers, Weiss and Co. said this was an unprecedented move by Congress.
“I have been doing this for just about 25 years, and I don’t remember them ever extending anything past the end of the year besides IRAs,” he said. “Usually there is not much we can do once we are past Dec. 31, so this is a new thing that has been opened
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up and is available to everyone.”
The special dedication can only be made if you itemize your tax return for 2004, rather than taking a standard deduction. It also is restricted to cash gifts specifically earmarked for disaster relief.
“In order to take a deduction for any charitable contribution you have to itemize,” said Kris Moore of the IRS. “There are no extra forms to fill out, no additional burden on taxpayers. As long as you write your check by the end of this month, the donation will be treated just like it was made in 2004.”
Moore said you must remember whether you deducted your donations on your 2004 return when 2005 returns come due.
“You have the option of either deducting the contribution on your 2004 return or your 2005 return, but not both,” Moore said. “I would advise you when you write your check out, down in the memo area put ‘tsunami relief 2004.’ That way, you would know if you claimed it on your 2004 return.”
Shari Wooldridge, community relations specialist for the Boone County chapter of the Red Cross, said passage of the bill is not expected to increase donations.
“It really hasn’t affected anything that we do. We really don’t ask our donors when they come in if they are deducting it,” Wooldridge said.
The Red Cross chapter raised about $22,000 for tsunami relief. Nationally, more than $150 million has been pledged to the Red Cross for the relief effort.
Wooldridge said she couldn’t predict whether the bill would encourage more donations.
“The community has been so generous with donations already,” she said.