Corporate Limit On Charitable Contributions Increased To 25% Of Taxable Income

Corporate Limit On Charitable Contributions Increased To 25% Of Taxable Income

The law now permits C corporations to apply an increased limit (Increased Corporate Limit) of 25% of taxable income for charitable contributions of cash they make to eligible charities during calendar-year 2021. 

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Normally, the maximum allowable deduction is limited to 10% of a corporation’s taxable income.

Again, the Increased Corporate Limit does not automatically apply. C corporations must elect the Increased Corporate Limit on a contribution-by-contribution basis.

Increased limits on amounts deductible by businesses for certain donated food inventory

Businesses donating food inventory that are eligible for the existing enhanced deduction (for contributions for the care of the ill, needy and infants) may qualify for increased deduction limits. 

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For contributions made in 2021, the limit for these contribution deductions is increased from 15% to 25%. 

For C corporations, the 25% limit is based on their taxable income. 

For other businesses, including sole proprietorships, partnerships, and S corporations, the limit is based on their aggregate net income for the year from all trades or businesses from which the contributions are made. 

Call the "Tax Pros on Demand" now at 215.550.3636.

A special method for computing the enhanced deduction continues to apply, as do food quality standards and other requirements.

Keep good records

The IRS reminds individuals and businesses that special recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. 

Usually, this includes obtaining an acknowledgment letter from the charity before filing a return and retaining a cancelled check or credit card receipt for contributions of cash. 

Call the "Tax Pros on Demand" now at 215.550.3636.

For donations of property, additional recordkeeping rules apply, and may include filing a Form 8283 and obtaining a qualified appraisal in some instances.

Your Tax Pro On Demand, 

R Clyde Olivieri, Jr.

Call the "Tax Pros on Demand" now at 215.550.3636, from 1000am to 1000pm, Monday through Sunday, should you have any questions on this or any other subject matters related to your business's or your individual income tax returns.

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New IRS Webpage For Taxpayers Receiving Large Refunds That Require Review

Taxpayers can now find answers to most questions about Joint Committee case reviews and links to additional resources at Large Tax Refunds and Credits Subject to Review by the Joint Committee on Taxation – What to Expect.

The IRS has introduced a new webpage that provides information to taxpayers whose large refunds are subject to further review by the Joint Committee on Taxation (JCT or Joint Committee).

Call the "Tax Pros on Demand" now at 215.550.3636, from 1000am to 1000pm, Monday through Sunday, should you have any questions on this or any other subject matters related to your business's or your individual income tax returns.

By law, when taxpayers claim a federal tax refund or credit of more than $2 million ($5 million for a C corporation), the IRS must review the refund or credit and provide a report to the JCT, a non-partisan committee of the U.S. Congress. Refunds subject to this review are known as “Joint Committee Refund Cases.”

 

Taxpayers can now find answers to most questions about Joint Committee case reviews and links to additional resources at Large Tax Refunds and Credits Subject to Review by the Joint Committee on Taxation – What to Expect.

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The new webpage covers the following topics:

• What is a Joint Committee Refund Case
• How the IRS handles a Joint Committee Refund Case
• What you need to do

A Joint Committee Refund Case may arise from the following:

• A refund claim for previously assessed and paid taxes. A refund claim may be made on an amended return or be made by a claim submitted during an examination. A refund claim would be reviewed by the IRS and reported to the JCT before being paid.
  
• A tentative refund from tentative carrybacks of net operating losses, capital losses or credits. The tentative refund would be claimed on Form 1139, Corporation Application for Tentative Refund, or on Form 1045, Application for Tentative Refund. A tentative refund would be paid prior to IRS and JCT review.
• A refund or credit of income taxes due to certain losses relating to federally declared disasters.
  

 

The IRS estimates the new webpage will help hundreds of taxpayers. The agency notifies taxpayers who have Joint Committee Refund Cases that are subject to review. Taxpayers who have been contacted by an IRS agent should work with the agent assigned to their Joint Committee Refund Case.

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Your Tax Pro on Demand, 

R Clyde Olivieri, Jr.

P.S.  Should you believe to have fallen into a situation related to this issue and know not what to do, or how to handle your specific matter, call us now, at 215.550.3636, from 1000am until 1000pm, Monday through Sunday.  We will come up with solutions or suggestions, related to your potential tax consequences.