Determining the True Value of Your Charitable Car Donation and Avoiding an Irs Audit

| Posted: 08-06-2008 | Comments: 0 | Views: 4 | Rating: (50)

(?)

It could be said that the new regulations regarding car donation, going into effect during the 2005 tax season, actually make it easier to avoid audit, since there is far less wiggle room to maneuver within. However, to actually take a legal deduction from your taxes, there will need to be some forms filed and receipts gathered.

The extent to which you are required to prove the worth of your charitable donation, given to a IRS approved 501 (c)(3) non-profit organization (NPO), is determined by the likely value of the gift. That said, one doesn't always know what the sale of their car will fetch in the marketplace, regardless of what some chart may tell you. The actual price your car donation fetches will be your deductible value, and this can actually be rather low when sold on the wholesale market, especially by a third-party agency that facilitates car donation for NPOs that lack the facilities or manpower to handle such donations themselves.

Begun several decades ago by the Goodwill Corporation to train their employees and recycle unwanted vehicles, car donation programs were designed to be offered by NPOs alone to serve a direct and needy market. In the 1990s, a tremendous upsurge in for-profit organizations that spent a great deal of money on advertisements created a rapidly expanding trend of even lower-middle class individuals using car donation to reap the charitable tax deductions offered by the receiving agents.

When assessing your car donation, one must really consider what it is worth on the market, both if you sell it yourself and if you use another agency to sell it on the wholesale market for you. One can assume anywhere from 20-60% of the value of the retail market in such sales. Since a great many NPOs still use third-party (over 95% being for-profit organizations according to a scathing 2002 investigative article) intermediaries to manage the pickups, title-transfers and sales, you should give some hard consideration to how you want to handle your own car donation.

Many people choose to fix up and sell their own vehicles, preferring to pay tax on that “income” and give the remainder to the charity of their choice. Everyone, after all, takes cash. This way you also act as your own “middle man,” giving your time as well as the donated value of your car. You could even sell that car for scrap, have it hauled away, and give the proceeds to the charity, cutting out that sometimes very expensive middle step of involving a car donation facilitator.

Regardless of how you go about it, a non-cash gift to a charity is likely to fetch less than $250, you don't need any sort of receipt from the NPO – the IRS will, in this case, take you at your word. All you need to supply is the name of the charitable organization that received your car donation, the date of the car donation, the place the donation took place,

However, if the value of your car donation is $250 or greater, you'll need to get a receipt from the charity that is officially registered as an NPO or charity by the IRS. If you want to check up on a given charity's status, they should be able to provide you with a non-profit tax ID number that you can then check against the IRS database. This receipt should be dated and indicate what use the vehicle was to be put to, even if it is just for sale.

Car donations destined for immediate sale are typically not valued for tax purposes until the sale has been made. Instead, one will receive a temporary receipt that indicates a transfer of title and a forthcoming receipt to be used for determining your deduction.

This is most often true of vehicles worth over $500. Such vehicles must be accompanied by Form 8283 (section A only) that the authorized charity issues along with their own receipt of car donation monies. In a perfect world, those separate car donation and charitable income figures will match up with each other as well as the amounts people are deducting from their personal or family income taxes, as they assuredly didn't before 2005.

Sale values over $5,000 must also be accompanied by an appraisal from an independent agent that can verify the fair market value of any car donation. Now that one must present proof of how much their car donation earned at auction, there is little reason to make any kind of error when valuing your car donation for deductible purposes.

Rate this Article:

Current: 0 / 5 stars - 0 vote(s).

Article Tags: Car Donation, Charitable Giving, Irs Tax Burden, Donate Your Car To Charity, Vehicle Donation To A Charity Of Your Choice

Article Source: http://www.articlesbase.com/cars-articles/determining-the-true-value-of-your-charitable-car-donation-and-avoiding-an-irs-audit-442357.html

Print article

Send to friend

Publish this Article

Author feedback

About the Author:

Allen believes that great articles come from quality research on the subject matter. For quality articles that have been researched visit LSI Monthly Or sign up for free websites and PLR Articles for life at his soon to be launched Profit With Articles Membership Site Allen invites you to submit your own articles to his article directory: Article Profit

Submitting articles has become one of the most popular means of generating quality backlinks and targeted traffic to your website. Join us today - It's Free!

Article Comments

Add new Comment

Taking Some Car Donation Deductions Can Actually Increase Your Tax Liability Due to Special Situations
By: Allen Lundy | 08/06/2008 | Cars

New Laws on Donating a Car
By: Jessica Deets | 09/05/2006 | Non-Fiction

Paying For A Used Car At A Used Car Auction
By: Alan Winters | 27/04/2007 | Automotive
Car Articles, Vehicles, Auto's Articles all related to the automobile world.

Charitable Car Donation Eliminates the Hassles of What to Do With your Old Car
By: Arturo | 28/08/2007 | Automotive
Car Articles, Vehicles, Auto's Articles all related to the automobile world.

Why Donate Your Car To Charity?
By: Daniel Richards | 04/12/2007 | Automotive
Car Articles, Vehicles, Auto's Articles all related to the automobile world.

Car Donation: Making The World A Better Place To Live In
By: Alex Baumm | 15/03/2008 | Cars

Are You the Type of Person Who Will Donate a Car to Charity?
By: Dave Everett | 17/09/2008 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

Future Trends: Education in America
By: Kristin Gabriel | 11/04/2008 | Education
Education related free articles.

Got a Question? Ask.

Ask the community a question about this article:

Frequently Asked Questions

Gift giving categories
By: Annie | 30-09-2008
What are some sample names for extra giving categories for non-profits? For example, the President's Circle, the Legacy Circle, and then, those names specific to a performing arts organization. This is a service organization for seniors and we're looking for a special name for a special gift giving opportunity.

How do I find out where the auctions are here in ...
By: vaneck34 | 13-01-2008
how do I find out where the auctions are here in virginia beach va vaneck34@yahoo.com

Q&A Powered by:

Latest Cars Articles

M1 Homage Concept Design Take People Back
By: nlwest21 | 11/10/2008
BMW has given the new M1 Homage concept car a new design that has shocked many consumers and enthusiasts. This design was a combination of the classic M1 mixed in with a more futuristic design.

Now Worries, Learn How to Handle a Used Car Dealer
By: Justin Briggs | 11/10/2008
Basic advice on how to handle a car dealer for anyone who is buying a used car for the first time.

Useful Advice for Buying a Used Car
By: Justin Briggs | 10/10/2008
Useful tips and advice for anyone buying a used car for the first.

5 Smart Ways To Buy a Used Car
By: Brian Knapp | 10/10/2008
In this economy it is no secret that it is much smarter to buy a used car than a new car. In fact, with such a huge drop in value of new cars you would be an absolute fool to buy one.However, just because you save money buying a used car means that it's all rainbows and happy clouds. Buying a used vehicle has its own set of potential problems.

Tips on How to Replace Brake Pads
By: Everette Jamison | 10/10/2008
Brake pads naturally wear out over time. Luckily, it is not as difficult to replace them as you may think.

Your Winter Auto Maintenance Checklist
By: Everette Jamison | 10/10/2008
Safety is the most important factor when it comes to winter driving. While safety should be on your mind whenever you drive, during winter it is especially important.

The Audi Heritage In Rallying
By: Thomas Pretty | 10/10/2008
A look at how the cars on the forecourts of Audi dealerships today can trace a strong heritage in motor sport and particularly in the rally sphere.

Everything You Need To Know About Range Rover Leasing
By: Dominic Donaldson | 10/10/2008
This article suggests putting a 4X4 vehicle to good use by using it on a dirt day out; negotiating obstacles for a thrilling weekend after a hard week at work.

More from Allen Lundy

The Irs Wants You to Know Some Frequently Asked Questions on Car Donation Charities
By: Allen Lundy | 08/06/2008 | Cars
Though many people consider the Internal Revenue Service (IRS) to be their own personal nemesis, given the ever-increasing cut of income that's taken every year, the are some car donation charities FAQs it is to everyone's benefit you should be aware of, as a taxpayer. To that end, the IRS has gone to great length to make their policies easily available in many different ways, some of which are generally more effective than others.

How to Reduce Your Irs Tax Burden Through Charitable Giving and Car Donation
By: Allen Lundy | 08/06/2008 | Cars
Most people assume that car donation and charity giving are tools the rich alone are able to use to ease their tax burden. This couldn't be further from the truth! Anyone can file a tax return with itemized deductions if they bother taking the time and effort to do so. Though you are responsible for gathering receipts that back up your deduction claims, car donation for charity is now set up in such a way to make claiming the correct amount in deduction easier than ever.

Taking Some Car Donation Deductions Can Actually Increase Your Tax Liability Due to Special Situations
By: Allen Lundy | 08/06/2008 | Cars
Not all car donation deductions are created equal – there are even cases where donating an auto in good faith can actually increase your tax liability under certain circumstances. Like anything else involving the IRS, the burden of proof is upon you, so the more information and documentation you have to back up your car donation deduction, the better.

Affiliate Marketing: a Cost-effective Ways to Advertise Your Business
By: Allen Lundy | 27/03/2008 | Affiliate Programs
Whether you are into Internet Marketing as a business or not, somewhere along the line you have heard of affiliate marketing and affiliate programs. This type of marketing and these programs are forms of advertising on the Internet which provide a financial reward to affiliates for driving traffic to the advertiser in hopes of generating a sale.

Article Writing as an Affordable Internet Marketing Method
By: Allen Lundy | 27/03/2008 | Article Writing
When internet users type in keyword searches in any of the search engines, their goal is to find relevant information for the specific keywords they used. Once they click on the 'search' button, the search engine returns the most relevant websites and articles pertaining to the search words or search phrases they input. This is what ultimately leads people to your website or blog. This is what is called free traffic or search engine traffic.

Article Categories

Article Marketing

Article Notepad

Stop Duplicate Content

Term Papers

Need Help?

Sign up for our email newsletter

Receive updates, enter your email below

Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
Copyright © 2005-2008 Free Articles by ArticlesBase.com, All rights reserved. (0.50, 17)

Determining the True Value of Your Charitable Car Donation and Avoiding an Irs Audit

Article Comments

Related Articles

Got a Question? Ask.

Latest Cars Articles

More from Allen Lundy

Need Help?

Site Links

Webmasters

Business Info

Sign up for our email newsletter