IRS warns against donating used cars to bogus charities for tax deduction
Monday, December 3rd 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ The IRS warned on Monday that people looking to donate cars to charity and take a tax deduction should ensure the organization is legitimate and keeps proper records.
December usually signals an increase in charitable giving, in part because of the holiday season but also because it marks the last few weeks that a taxpayer who itemizes can do things to maximize tax deductions for the year.
Donations of used cars have steadily risen in popularity and charities have rushed to embrace them. But Internal Revenue Service Commissioner Charles Rossotti and state officials say contributors must take care that their old car is actually going to a worthy cause.
``Don't get taken for a ride,'' Rossotti said.
A tax deduction is not allowed unless the donation is made to a bona fide tax-exempt organization. One way to check is by looking at IRS Publication 78, which is available on the agency's Internet site and contains an annual list of charities eligible to receive tax-deductible contributions.
Some charities hire solicitors to seek donated cars. Officials say some taxpayers question what happens to the money if the car is resold.
``Any reputable charity should be happy to provide potential donors with financial reports and other information about its activities,'' said Karin Kunstler Goldman, assistant New York attorney general and president of the National Association of State Charity Officials.
The IRS and state charity officials also recommend that:
_Deductions for car donations reflect ``fair market value,'' which is essentially what a willing buyer and seller would agree the car is worth. Not every car is worth the full value listed in the vehicle ``Blue Book'' because of age, condition, mileage and other factors. IRS Publications 526 and 561 can help taxpayers determine the value.
_Keep detailed records, including receipts, and file any necessary IRS forms. Again, IRS Publication 526 has the details.
_Check state law for how to handle the transfer of the car's title and license plates.
_Taxpayers itemize where possible to take advantage of charitable deductions. Most people itemize only if it increases their total deductions above the standard deduction of $4,550 for single people and $7,600 for married people filing jointly.