Tax Time Preparation: Explore Your Charitable Options
WILLIS: You know it's hard to believe that tax time is just a few months away and it may seem too early to think about it, but there are some things you should be doing right now to get the most out of tax season. Roni Deutsch is a tax attorney and she joins us from Sacramento. Roni, great to see you again.</s>RONI DEUTCH, TAX ATTORNEY: Yes, thanks for having me, Gerri.</s>WILLIS: All right, so the first thing we want to talk about is this idea of selling your losers. What do you mean by that and why is it an advantage?</s>DEUTCH: Everyone needs to look at their stock portfolio at the end of the year, Gerri, and determine should we sell our losers, should we sell our gains? What is important to know? You are allowed to deduct, Gerri, $3,000 in capital loss against any type of ordinary income. But the real money and the real savings, Gerri, is when you can deduct capital loss against some of your capital gain. We all know we've been hammered in the stock market, so let's take advantage of capital losses and let's also be aware that capital gains taxes will increase next year, so let's sell gains, save money on taxes in '09, rather than pay more in our gains in 2010.</s>WILLIS: You know that's great advice, Roni. A lot of people out there have been so afraid to invest and put money away in their 401(k). What would you just say to them at the end of this year, what would be a good thing to do right now?</s>DEUTCH: Everybody needs to make a date with themselves in the future. You can save on pre-tax dollars, $3,000, $4,000, $5,000 right now, Gerri, and all you have to do is put $16,500 in a 401(k) plan. Everyone is entitled, but we're afraid to put money in the stock market, because we know we've lost a lot. I say put that money in your 401(k) plan and save $3,000 right now in pre-tax dollars. It's a great way to not pay taxes today, and make a date with yourself in the future.</s>WILLIS: I think that's a great idea. You know, one of the really frustrating things, though, out there for people, who are unemployed, they get these unemployment benefits, but guess what? They're taxed. So, let's talk about the best way to, you know, plan for that, get around that. What can I do if I have unemployment benefits and I'm going to owe taxes on them?</s>DEUTCH: Do you realize we've got 17 million people looking for six million jobs. Guess what? Those 17 million people are receiving unemployment benefits, which means, Gerri, they are going to have to pay taxes on the money they received. Here's the good news, here's the consolation prize. On the first $2,400 in unemployment benefits that you received in 2009, you do not have to pay taxes on that money. That's the good news, but everyone who's receiving unemployment benefits. We know they extended that program. You've got to pay taxes on it, be prepared to pay Uncle Sam on whatever you've received.</s>WILLIS: Well, Roni, thank you so much for that great information. I really appreciate it. This is something to think about right now, before this year ends. Thank you. You may also get a tax break if you explore your charitable option this is holiday season. In this economic downturn giving is more important than ever. Here with some creative ways to maximize your charitable impact without having to part with your much-needed cash is George Mannes, he is a senior writer for "Money" magazine. Good to see you.</s>GEORGE MANNES, MONEY MAGAZINE: Thank you for having me, Gerri.</s>WILLIS: All right, so the first thing you say is maximize your resources. It doesn't have to be your cash necessarily that you're giving.</s>MANNES: No. Your professional expertise, once -- is extremely valuable for the companies, excuse me, for the charities you might do work for. They can't afford to hire marketing people, they can't afford the legal help they need. You go in and might be like the easiest thing in the world for you, but it does a great benefit for them.</s>WILLIS: And that's a great idea. You're extending yourself, giving something but don't have to put any actual cash down. Another great idea you have is don't miss your match. Companies are meeting you half way, some employers. Tell us about that.</s>MANNES: Yeah, you'd be shocked at how many companies still match your charitable gifts to the 501-C3 organizations.</s>WILLIS: They got to qualify.</s>MANNES: They have to qualify.</s>WILLIS: They have to be a real charitable organization.</s>MANNES: And usually you can't give it to your house of worship either or a fraternal organization. But 75 percent of employees, at the companies that are eligible for these things, don't take advantage of them and we're talking serious money. Some of them will easily match up to $5,000 of whatever you give.</s>WILLIS: Now, one of the things I've seen people do and I think it's successful is they get friends and family to come in with them, to help do that charitable giving. What is the best way to do that and are there any online resources to help?</s>MANNES: Well, yeah, there are a bunch of ways to do it. One is to have a party, and say...</s>WILLIS: I love that, that's great idea, let's have a party.</s>MANNES: Let's say it's a bunch of professional women and say bring in your own clothes and you can donate your really nice outfits that you don't wear anymore for organization, "Dress for Success," which gives women who could use them for a job interview. That's one easy thing to do.</s>WILLIS: You know, one of the interesting things that I saw in your story is this idea that there are cash-strapped charities out there you may want to avoid. How do I know if there's a problem with a charity?</s>MANNES: That's a very tough thing. There are a few things you can look at. One of them is how much working capital do they have. If they are, you know, have barely enough cash to get them through next week, giving them money, unfortunately, might be throwing good money after bad. Another thing that you can do is, another thing that you have to look at is how long has a charity been in existence. If it's still a startup, those, unfortunately, are the most vulnerable in a downturn.</s>WILLIS: You know, you've got to watch that obviously and really analyze these charities, so you get the biggest bang for your buck when you're giving. George Mannes thank you for helping us out today. We really appreciate it.</s>MANNES: Thank you, Gerri.</s>WILLIS: Thanksgiving is just around the corner and this means so is Black Friday. Retailers are pulling out all the stops this holiday shopping season. We'll tell you where you could score the very best deals.