WalletPop experts answer your tax questions on volunteer work, disability payments and more
byFeb 19th 2010 11:00AM
I perform volunteer work for my local county government. Are my expenses tax deductible; i.e., gas or mileage traveling to meetings and site visits, printer paper, printer ink, cartridges, etc.?
Answer from Bob Meighan, CPA and vice president of TurboTax
To deduct volunteer work, the organization must be recognized by the IRS as a tax exempt organization (like a 501c organization). Generally speaking, units of government, such as state departments or local government qualify. So while the joy of volunteering is rewarding in and of itself, it doesn't hurt that many of your expenses can be deducted on your tax return. Certainly, you'll want to track and deduct your out-of-pocket expenses such as the ones you mentioned and your mileage (at 14 cents per mile). Unfortunately, your time and expertise are not deductible. This is a great question, and we have tax and tech experts live on Twitter to help all season long @TeamTurboTax.
I sold 1.6 acres to my uncle for $20,000. The property was originally part of a 3.65-acre lot (that includes my current residence) which I received as a gift from my grandmother. In 2004, she divided the property, originally approximately 7 acres, between my mother and me. She and my grandfather inherited the property in 1967, part of a larger lot, when my great-grandfather died. How do I find the cost basis and FMV for the 1.6 acres I sold to my uncle?
Answer from Barbara Weltman of The J.K. Lasser Institute
For purposes of figuring gain on the sale of property received by gift, the basis generally is the basis in the hands of the person (called a "donor") who gave it to you. Often, this can be difficult to determine, because there may be no records of prior purchases or transactions. If the donor inherited the property, then the donor's basis is equal to the value of the property at the time of death of the person who bequeathed the property to the donor (although some adjustments to basis may apply). Unfortunately, it is up to a taxpayer to establish basis. If this cannot be done, then all the gain on the sale of the gifted property may be taxable.
Are there any provisions this year for income averaging? I have emptied my IRA trying to help my son keep his business going. To date, I have not recouped any of these funds. Is there any way to spread out the income taxes I am facing?
Answer from Bob Meighan of TurboTax
Income averaging went away back in 1986. For those of us old enough to remember this method for computing your taxable income, the tax was figured on the average of the total of current year's income and that of the three preceding years. It was advantageous to use this method when your income fluctuated significantly from year to year. By the way, emptying your IRA is a very expensive tax move, since you are likely to pay not only income taxes on the distributions, but also a 10% penalty. This really hurts. While there may be ways to mitigate the impact of the distributions by paying it back to the IRA, it sounds like you'd better be prepared to pay the tax come April 15. In some cases, you may be able to negotiate an installment payment plan with the IRS if you don't have the wherewithal to pay now.
I've been getting disability since May of last year. I was not aware I had to tell them to tax it, so no taxes have been taken out. My income for the year is $19,537.96. I have a son who is 17 and still in school. What happens in a case like this?
Answer from the J.K. Lasser Institute's Barbara Weltman
Disability benefits from Social Security are taxed in the same way as Social Security retirement benefits -- they can be fully tax free or included in income at 50% or 80% , depending on your overall tax picture. If you are single and your "provisional income" (your income increased by 50% of these disability benefits and any tax-free interest) is no more than $25,000, you won't owe any tax on the benefits. A $32,000 provisional income threshold applies to joint filers. Otherwise, you'll have to go through a computation to figure the taxable portion of benefits. If you find you're subject to tax for 2009 benefits, consider requesting income tax withholding on benefits in 2010.