The 2003 Tax Act impacts upon your taxes in several ways. All taxpayers benefit from the lower tax rates and many of you benefit from the increases in the Child Tax Credit.

1. A comparison showing the savings from the old tax rates versus the new tax rates for taxable income ranges from $5,000 to $5,000,000;

2. The increase in the Child Tax Credit for those with one qualifying child (under the age of 17 as of 12/31/03); and

3. The increase in the Child Tax Credit for those with two qualifying children (under the age of 17 as of 12/31/03).

In addition to the savings reflected on the tables, you may benefit from reduced tax rates for dividend income and long-term capital gains.

© Copyright 2003 E. Martin Davidoff (U.S.A.) 2003-Old 2003-New

CHARITABLE CONTRIBUTIONS UPDATE / ALERT

1. Effective February 14, 2007, you cannot deduct a contribution to a Donor Advised Fund (Charitable Gift Fund) if the sponsoring organization is a war veteran’s organization, a fraternal society, or a nonprofit cemetery company.

2. Effective for all charitable contributions of Clothing or Household Items after August 17, 2006: A new provision provides that no deduction is allowed to an individual, partnership or S corporation for these items unless the items are in good used condition or better. This rule does not apply to a single item that is donated with a value of $500 or more if a qualified appraisal with respect to the property is included with the tax return.

3. Effective for tax years beginning after August 17, 2006 (This will impact most of our clients beginning January 1, 2007, since individuals and businesses are generally calendar year tax- payers.): No deduction will be allowed for cash contributions, regardless of the amount, unless the taxpayer has either (1) bank records such as a cancelled check or account statement or (2) written acknowledgment from the charity documenting the contribution amount and date.

Please note that under the old law, cash contributions of less than $250 could be substantiated with “reliable records,” which could include something other than bank records or donee acknowledgment.

Please make certain to review the accompanying enclosure regarding Charitable Contributions, which provides the general information you will need in order to report your charitable contributions on your tax return this year.

CHARITABLE CONTRIBUTION

Did you make any cash or noncash charitable contributions in 2007? If so, it is very important that you complete the appropriate pages of the enclosed tax organizer. In addition, the following discussion outlines general record keeping requirements for charitable contributions and identifies what information we will need in order to properly deduct the contributions on your tax return. Please also review the enclosed Update/Alert.

Many of our clients make significant noncash charitable contributions such as clothing and household items. For these charitable contributions, a detailed listing of the contributed items and related “thrift shop” fair market values is needed, such as in the example below, in addition to the written acknowledgment.

If you would like us to prepare this list for you, please complete the information in the tax organizer and/or attach sheets as needed that provide us with the following information:

1. Name and address of the charitable organization;

2. The date of the contribution; and

3. A list of what was contributed (# of items, description and condition as in the example below).

If you want to reduce the amount of time and billing that will be incurred by our office in preparing these detailed lists, please feel free to provide us with lists that you have prepared. We suggest that you use the following format:

 

Mr. & Mrs. John Doe SS# 555-55-5555 and 555-55-5555 Charitable Contributions The Salvation Army 123 Scott Road, Edison, NJ 55555 Donated on October 10, 2006
#of Items	Description	Condition	F.M.V Per Item	Total
3	Girls Shirts	Good	$ 8	$ 24
10	Women’s Blouses	Very Good	12	120
2	Men’s Winter Jackets	Very Good	25	50
9	Women’s Slacks	Excellent	12	108
2	Children’s Wind Breakers	Very Good	11	22
1	Electric Blanket	Very Good	24	24
			Total:	$348

There are several resources available that may assist you in properly preparing a list and valuing the items that you have donated.

1. The Salvation Army provides a “Valuation Guide for Items Donated to the Salvation Army.” This list could also be used as a thrift value guide for donations to other organizations.

2. There is a resource book called Its Deductible that provides general guidelines for charitable contributions and contains detailed lists of items that can be used to track your donated items along with suggested values. You can find this in any bookstore or look at the website online. www.itsdeductible.com

3. Other informative links containing a tremendous amount of useful information on Charitable Contributions are www.irs.gov/pub/irs-pdf/p526.pdf IRS Publication 526 Charitable Contributions, and www.irs.gov/publications/p561/index.html IRS Publication 561 Determining the Value of Donated Property.

Donation of Vehicles, Boat or Plane:

Effective January 1, 2005, if the claimed value of the donated motor vehicle, boat or plane exceeds $500 and the item is sold by the charitable organization, the taxpayer’s deduction is limited to the lesser of the gross proceeds from the sale or the fair market value at the time of the gift. Under the new rules, the charitable organization must provide an acknowledgment to the donor within 30 days of the sale stating the amount of gross proceeds, which must be attached to the return. Alternatively, if the charity significantly uses or materially improves the vehicle(s), the charity Prepared by E. Martin Davidoff & Associates, CPAs W:\16\Organize\2007\Charitable Contribution org.wpd must certify this intended use and duration and provide an acknowledgment to the donor within 30 days of the contribution, which must be attached to the return. If the charity significantly uses or materially improves the vehicle, generally, the donor may deduct the vehicle’s fair market value at the time of the gift. This is in keeping with the old treatment and you may wish to seek a charity who will use the vehicle in this manner to ensure a deduction for full fair market value.

Substantiation Requirements for Charitable Contributions For charitable contributions of $250 or more, one is required to obtain a contemporaneous (as explained below) written acknowledgment from the donee prior to filing one’s tax returns in order to take the deduction. Please provide us with copies of the written acknowledgment(s) and/or appraisal(s).

1. Written Acknowledgment

The written acknowledgment must include the following information:

a) The amount of cash and/or a reasonably detailed description, but not necessarily the value, of any noncash property contributed;

b) Whether the recipient organization provided any goods or services in consideration for any property contributed;

c) If goods and services were provided as described in item (b) above, a description of those goods and services and a good faith estimate of the value of such goods and services. If the goods and services provided to the donor consisted solely of intangible religious benefits, a statement to that effect should be included. The receipt of intangible religious benefits does not reduce the amount of the charitable contribution. The term “intangible religious benefit” means any intangible religious benefit which is provided by an organization organized exclusively for religious purposes and which is not sold in a commercial transaction outside of the donative context (e.g. admission to a religious ceremony);

d) The name of the charitable organization; and

e) The date and location (for noncash contributions) of the charitable contribution.

2. Contemporaneous Requirement

Substantiation is contemporaneous for the purposes of this written requirement if the taxpayer obtains the acknowledgment on or before the earlier of:

a) The date the taxpayer filed a return for the taxable year in which the contribution was made; or

b) The due date (including extensions) for filing such returns. Substantiation need not be acquired by the taxpayer if the charitable organization files, in accordance with Treasury regulations, an information return which includes the contents of the written acknowledgment set forth above. For cash contributions, you should retain the canceled check(s) or account statement(s) showing the name of the organization, the date of the contribution and the amount of the contribution. For noncash charitable contributions over $500, but not more than $5,000, your records must also include the following:

1. How you obtained the property (e.g. purchase gift, inheritance);

2. The date you obtained the property; and

3. The cost or other basis of the property.

For noncash charitable contributions over $5,000, generally, you must obtain a qualified written appraisal of the donated property from a qualified appraiser and complete Schedule B of From 8283. You should retain the appraiser's written report with your records.

Please do not hesitate to contact our office with any questions that you may have.

2008 CHANGES IN TAX RATES, PAYROLL TAX RATES, EXEMPTIONS AND OTHER ITEMS TIED TO INFLATION

© Copyright 2008 E. Martin Davidoff (U.S.A.)	2007	2008
1. Personal Exemptions	$3,400	$3,500
2. Standard Deduction
Single	5,350	5,450
Head of Household	7,850	8,000
Married	10,700	10,900
Dependents	850	900
3. Tax Rates
Single
10% Bracket	0 - 7,825	0 - 8,025
15% Bracket	7,825 - 31,850	8,025 - 32,550
25% Bracket	31,850 - 77,100	32,550 - 78,850
28% Bracket	77,100 - 160,850	78,850 - 164,550
33% Bracket	160,850 - 349,700	164,550 - 357,700
35% Bracket	above 349,700	above 357,700
Married
10% Bracket	0 - 15,650	0 - 16,050
15% Bracket	15,650 - 63,700	16,050 - 65,100
25% Bracket	63,700 - 128,500	65,100 - 131,450
28% Bracket	128,500 - 195,850	131,450 - 200,300
33% Bracket	195,850 - 349,700	200,300 - 357,700
35% Bracket	above 349,700	above 357,700
4. Phase out Range for Exemptions (Married Filling Joint)	above 357,700	239,950 - 362,450
5. 3% Phase out of Itemized Deductions commence at:	156,400	159,950
6. Standard Mileage Rate	48.5¢	50.5¢
7. 401(k) Employee Contribution Limit	15,500	15,500
8. Annual Gift Tax Exclusion	12,000	12,000
9. NJ Unemployment Tax Wage Base	26,600	27,700
Under the Federal Insurance Contribution’s Act (FICA), an employer is required to withhold social security taxes from wages paid to an employee during the tax year and must also match the tax withheld from the employee’s wages. For 2007 and 2008, the tax rate of the withholding is 7.65%, which consists of a 6.2% component for old age, survivors, and disability insurance (“OASDI”) and a 1.45% component for hospital insurance (“HI”, also known as medicare). Below are the OASDI and HI wage bases for 2007 and 2008.
	2007	2008
OASDI Wage Base - 6.20%	$97,500	$102,000
HI Wage Base - 1.45%	NO CAP	NO CAP
“800" number for Social Security Administration Toll Free 1-800-772-1213 Weekdays 7 a.m. to 7 p.m.

© Copyright 2008 E. Martin Davidoff (U.S.A.) All Rights Reserved