COVID-19 is the official name given for the infectious disease caused by the most recently discovered coronavirus strain. There are 372,563 confirmed cases of COVID-19 in 167 territories and countries as of March 23, 2020, according to Johns Hopkins. The United States as a whole has 33,404 confirmed cases.
If you are like me, you are self-quarantining in your home in response to the spread of the coronavirus. It is definitely a weird new normal. And for many, it is an anxious time. But as we worry about the health — both physical and financial — of our loved ones, most of us would like to know: How can we help?
The federal government is now offering some relief. The Internal Revenue Service (IRS) has extended filing and payment due dates to July 15, 2020. Also, many states have extended due dates and are making other relief programs available. Congress has passed relief packages and has promised more such as stimulus checks.
However, we know that likely is not enough. You might also want to help. Some times that help that can result in a tax break. Some of the tax rules are good to know, even if you are not claiming a deduction. Here are just a few tips to keep in mind:
- Cash is king. For many organizations like the Giving Center, cash, or cash equivalent, is preferred. Remember to keep receipts if you would like to claim those donations on your tax return.
- Stay put. We all want to help, yet many states have restrictions on travel, and the federal government has asked that we as a nation stay at home when possible. Ask first. If your volunteer services are needed, keep in mind you may also claim a tax deduction for out-of-pocket expenses but not for your time.
- Be smart. Be wary of any personal solicitations. Make sure that donations made by check or credit card are secure. And do not send money by text or apps like Venmo without verifying the organization and contact info. As always, keep excellent records for tax purposes — having the information available is handy if you want to make another donation.
- Confirm charitable status. If the tax deduction matters to you, make sure that your donation goes to a qualified charitable organization like Giving Center. You can search using IRS’ Tax Exempt Organization Search (formerly Select Check).
- Check with the organization first. Wish lists can change as needs are assessed, and storage might be limited. Check with the organization before you send off anything. If you are planning to claim a tax deduction for any in-kind goods, keep receipts showing what you paid for the items.
- Use caution when donating to individuals. For IRS tax deduction purposes, you can only deduct contributions to qualified charitable organizations. Unfortunately, donations to individuals are never deductible for tax purposes. There is a very good non-tax reason to be cautious: money solicited for individuals might be part of a scam, and you have no control over how your gift might be used. The Federal Trade Commission has a tip sheet on how to avoid scams.
- Rely on oldies but goodies. There is nothing wrong with newer charitable organizations, but there is something to be said for those that have been around, like the Giving Center. Brand new organizations may not have the facilities to offer the most effective relief — or they could also be scams.
- Pay attention to the rules. Rules for charitable giving apply even in extraordinary situations. Bur sometimes those rules may be tweaked to allow for more generosity, so check with reliable sources for constant updates.
For a few more tips on making your charitable donations count for tax purposes, click here.
What is also important to remember is:
- Be generous to those who are delivering your food, etc. You may easily help out folks who might be experiencing a financial downturn by simply offering up a few extra dollars at the door. You aren’t able to deduct tips to the paperboy or the pizza delivery girl, but who cares? They are bringing you food and other useful things so remember to be kind and be generous.
- What if you just want to help out your neighbor or your favorite driver? You don't have to overthink this. If you are helping out of the kindness of your heart and not expecting anything in return, it is a gift: gifts are not taxable for income tax purposes. Unless you make a habit of giving individuals gifts above the annual gift tax exclusion ($15,000 for 2020), you are fine when it comes to the gift tax, too. Yes, that includes GoFundMe and alike fundraisers.
- What about gifts to tide over employees? No matter what you want to call it, a donation given to an employee is considered compensation. That is especially true for cash or equivalent. There is an exception for small non-cash gifts considered de minimis: Those gifts aren’t taxable. A small basket of fruit would be de minimis and nontaxable — a massive box of your favorite treats, likely taxable.
