Have you made a donation to charity this year? Do you plan to make one before December 31? Times are tough but people routinely give money to those with greater needs. The IRS just released more tips regarding a tax deduction on your 2010 personal tax return. Remember the following details:

• Make contributions to qualified organizations. Use IRS Publication 78, Cumulative List of Organizations from the IRS.gov website to point out the best candidates for your good intentions.
• You can only base your deduction on actual (rather than pledged) charitable contributions made by December 31; that is , during the tax year.  Credit card charges and check payments are counted in the year they are dated; not when the charges are actually posted.
• Remember that many deductions are only available to taxpayers on IRS Form 1040 Schedule A. You have to itemize many deductions rather than take them as part of the standard deduction to reduce your taxable income.
• Though special rules apply for some donated property categories, you can typically deduct cash contributions and a property’s fair market value from your taxable income. Determine the eligibility of each contribution case by case.
• You can only calculate deductions for the value of your contribution that is IN EXCESS of the benefits you receive (tickets to a sports event, admission to a dinner, or fair market value of an object). Keep records of the contribution regardless of the amount of the deduction.
• Any contribution over $249 must have additional documentation such as written acknowledgment or receipt by the group or organization receiving your donation. These records must include the date, the exact amount, and description of the donation.  If you make charitable donations over $499 you are required to complete IRS Form 8283, Noncash Charitable Contributions and attach it to your tax return.  A written appraisal AND completion of Section B of the form are required for donations over $5,000.  Organize your financial records.

More questions?  Visit the IRS website, IRS.gov and download IRS Pub 526, Charitable Contributions or call the agency at 800-TAX-FORM (800-829-3676) for additional tax information.

The IRS reminds us that this summer’s child-care expenses can be used as a tax credit when you file after January, 2011.  Since parents work or are actively looking for employment, the documented cost of care for children under 13 years of age during the summertime (a period of school recess) may qualify for a tax credit on personal federal income tax.  This child and dependent care credit covers up to 35% of the following expenses depending on your reported income incurred during the tax year:

• Documented costs of day camp; overnight camp expenses DO NOT qualify for a credit.
• Costs for a provider of child care regardless of whether it pertains to an at-home sitter or at an outside day-care facility.

Keep records and any receipts of payment including Employer Identification Number (EIN) or Social Security Number and business address. For more information, refer to IRS Publication 503, Child and Dependent Care Expenses available on the IRS website, IRS.gov or by phone at 800-TAX-FORM (800-829-3676).  The PDF version of IRS Publication 503 is available here.

The Internal Revenue Service (IRS) announced last week that it would no longer provide tax preparers with taxpayer profile information that relates to debt.  These debt indicators (DI) help determine a taxpayer’s eligibility for Refund Anticipation Loans known typically as RALs.  Though extremely controversial, these RALS, which are secured by the amount of the anticipated tax refund, help provide a quick infusion of cash into taxpayers’ pockets but also cover fees for the tax preparation service.  With a RAL, all you have to say is “Have the bank deduct my preparation fees from my refund!”

Aside from heavy competition from do-it-yourself tax preparation software like Intuit’s TurboTax, the tax preparation “industry” has faced internal business “churning” especially since last April 15, 2010.  H&R Block Inc (NYSE:HRB), along with Jackson Hewitt Tax Services (NYSE:JTX), has not only lost significant market share value compared to Intuit Inc. (NASDAQ:INTU) but has also seen changes in top management including the departure of Tom Bloch, son of co-founder Henry Bloch.  In addition, recently resigned H&R Block CEO, Russ Smyth, has been replaced by a long-time member of the board, Alan Bennett.

These corporate events however, have little effect on customers compared to the change in IRS procedures regarding “debt indicators”.  Assuming tax preparation services will continue to find willing banking partners (e.g., H & R Block has a banking relationship with HSBC (NYSE:HBC)), RAL funding requirements will change and fees will more than likely increase to cover increases in bank collection risks.  Controversy has existed over the “legitimacy” of these very expensive, oftentimes called predatory loan practices by tax preparation services companies.  Many taxpayers who do not have bank accounts for direct deposit, however, rely on these RAL services to both pay for the tax preparation and simplify the receipt of their tax refunds. The effect of  this IRS procedural change is both significant and painful.

If you have depended on this form of “financing” your tax preparation fees in the past, you need to carefully reconsider your tax-filing plans this coming year.  Aside from the expectation of higher financing and bank service fees, there will now be the added issues of availability. Regardless of your past history, your application for a refund anticipation loan might be denied based on “simple” statistical models.  While these computer “programs” may have little knowledge of your personal circumstances, they could have a dramatic effect on your short-term financial planning.