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Cliffg37 Inner circle Long Beach, CA 2491 Posts |
At my magic club Saturday I won a raffle prize of some old Genii magazines from 1996. In one was a suggestion for what to do when approached by a non profit to do a free show. The author suggested swapping checks. That is the company should write you a check for your normal fee (Careful if it is more than $600) then you turn around and write them a check for the same amount. This means that the money exchange is a wash, but you have a receipt for a donation to a non profit group that you show the IRS at tax time.
Something about that seems dodgy to me. Is this legal? Or is this pulling a fast one on somebody.
Magic is like Science,
Both are fun if you do it right! |
Dannydoyle Eternal Order 21219 Posts |
It becomes a wash tax wise. You don't earn the money so paying taxes on it doesn't come into play.
It is more to establish a price point than anything, and to not work for free. There is nothing dodgy about it all all and I have recommended it.
Danny Doyle
<BR>Semper Occultus <BR>In a time of universal deceit, telling the truth is a revolutionary act....George Orwell |
RobertSmith Veteran user 330 Posts |
You do have a receipt for a donation.
You also have the check for income. So yes, the money is a wash, but the tax advantage is also. Like Danny said, it can establish price point. Otherwise, I'm not sure there's an advantage to it. Robert |
Karen Climer Veteran user Orlando, Florida 324 Posts |
It's not quite as cut and dry as the article explains. You need to talk to your CPA.
You can't deduct the value of a service, even if it is a service you normally charge for. If you normally charge $500 for your show and you do it for free for a church, the IRS considers that volunteering, not donating. For volunteering, you can deduct only your actual costs. Time and skill have no value to the IRS. Depending on your situation, there might be ways around this, but I'm not qualified to give legal advice. Also, the check swap is not an exact wash. From a monetary perspective, you are always better off not donating. There are other reasons to donate, but saving money on taxes is not one of them. For simplicity, let's say you charge $100 for your show. Also for simplicity, let's say you pay 30% taxes. If you do a show for $100, you would send $30 to Uncle Sam and keep $70. If you do a show for $100, then donate $100 back to the charity, you send nothing to Uncle Sam, but you also keep nothing. You have $70 less than the other way. Obviously, there are other reasons you might donate a show. Also, the price point argument is valid for the check swap. But if you are donating (whether it's money or a show) purely to save on taxes, you are losing. |
TomBoleware Inner circle Hattiesburg, Ms 3163 Posts |
Well said Karen.
Best to give the show and claim your expenses. You can't donate your full fee. Tom
The Daycare Magician Book
https://www.vanishingincmagic.com/amazekids/the-daycare-magician/ My Blog - https://boleware.blogspot.com/ |
Cliffg37 Inner circle Long Beach, CA 2491 Posts |
Thank you Karen, I had not thought of it that way, but what you said makes sense.
Magic is like Science,
Both are fun if you do it right! |
JordanB Special user dallas, tx 626 Posts |
I advocate against this for a few reasons.
What you are saying is this (using hypothetical figures): You will have income in the amount of $100 and an associated charitable donation in the amount of $100. You can deduct your expenses whether or not you donate your check, but there are a few reasons why this is not a good idea, in general- -charitable donations are only tax deductible if they are to a qualified tax exempt entity (like a 501(c)(3) organization) - charitable donations are a below the line deduction. This will raise your adjusted gross income ("AGI"). Many common tax credits and deductions use AGI to determine when they "phase out". For example the if your AGI is too high, you can't claim the child tax credit, student loan interest, etc. You generally want as a low of an AGI as possible. -lastly, charitable donations are only available as an itemized deduction. If you don't itemize your deductions and just claim the standard deduction then you just lost money out of your pocket. I do understand there can be some marketing value in setting a price point as mentioned above, but I would consider your tax position carefully before you use this approach. Also, make sure you get a receipt. |
Dannydoyle Eternal Order 21219 Posts |
I would only advocate doing it if you were planning on donating anyhow. I always establish value and you have a tough time doing that when nobody knows the price.
I do not know from tax advantages.
Danny Doyle
<BR>Semper Occultus <BR>In a time of universal deceit, telling the truth is a revolutionary act....George Orwell |
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