Interesting questions come up everyday at our tax firm. On the mind of many parents particularly those with part time or full time self-employment, relates to how their volunteer work for their child’s school might affect them from a tax standpoint. Now that is October, children have settled into their classrooms and many schools have begun requesting parent volunteers. This practice is becoming more and more common because schools face such large spending constraints. School volunteers might be needed for sports programs, tutoring, maintenance, bulletins, books fairs, drama productions, bands, academic tournaments or even bake sales.
It doesn’t always occur to the parent, but there may be some tax benefits that follow as a result. The question we are asked about most often is the value of volunteered time. The IRS does not allow any charitable deduction for this and the principle is simple; charitable deductions are a donation of taxable income. Because the donated time didn’t create income, no deduction from income occurred.
That said, almost every voluntary effort incurs some cost for the individual volunteer. These out-of-pocket expenses related to volunteering for tax-exempt organizations are indeed tax deductions. A qualified CPA will know that these deductions are reported on Schedule A and are thus only available to taxpayers who itemize deductions.
Clearly in order to deduct costs incurred during volunteer work, the charitable organization must not reimburse the expenditures. In addition, the expenses must have a direct connection to volunteered services and have arisen due strictly to the volunteering. Taxpayers cannot deduct any expenses for personal or general living costs, such as meals eaten while conducting a volunteer service. However, something like buying pizza for the speech team during travel for a school event is in fact tax-deductible.
Likewise, supplies for school projects are tax-deductible along with items given as prizes or awards. Keeping copies of receipts to support any expenses related to volunteer activities is something we always recommend. In addition, we also document the nature of the school event for the deduction on the tax return itself.
One deduction opportunity many parents do not realize is that driving for charitable activities may also incur a tax deduction. It is important to keep a record of the date, travel purpose, and numbers of miles as these are requirements of the IRS. Each year there are standard IRS mileage rates established for using a personal vehicle to perform a charitable function which is then calculated on the return. A word of caution however, mileage driven to and from ballgames or performances doesn’t count as charitable; actual work as a volunteer is required.
Also not every school related purchase will qualify as a deduction. Merchandise sold at school activities are not tax deductable so buying candy, popcorn, apparel with the school logo, and similar items will not qualify as a donation.
These tips are examples of the types of the proactive, year-round tax guidance we provide to our clients. At Professional Tax Resolution we often amend prior year returns and file back taxes for new clients, many of whom qualify for more deductions than they realize.
If you have an IRS or State Tax problem, our experienced tax professionals can help you resolve the tax issue that caused it. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.