Serving individuals and businesses in Virginia and North Carolina for more than twenty years, Corbin & Company is one of the premier accounting firms in Hampton Roads. Our reputation is built on providing valuable services to meet our clients' needs. News: 2008 retirement plan limitations: Annual 401(k) deferral limit - $15,500 Annual 401(k) age 50 catch-up - $5,000 Annual SIMPLE IRA deferral limit - $10,500 Annual SIMPLE IRA age 50 catch-up - $2,500 Annual IRA contribution limit - $5,000 Annual IRA age 50 catch-up limit - $1,000 Social Security wage base for taxation - $102,000 New Rules for Vehicle Donations - The IRS is on the lookout for inflated charitable deductions taken by taxpayers who have made used-automobile donations to charitable organizations. Many charitable organizations accept taxpayers' used cars as donations, and some taxpayers have then claimed deductions for the cars' retail values, which is typically much higher than the cars' actual fair market value (FMV). For any used vehicle with a claimed value of more than $500 donated after January 1, 2005, Internal Revenue Code Section 170(f)(12) limits a donor's deduction to the actual gross proceeds from the car's sale by the charity. In addition, the charity must provide the donor with a written contemporaneous acknowledgement of the donation within 30 days of the date of donation or disposition of the vehicle. The donor must attach this written acknowledgement to his or her tax return. The acknowledgement must include the donor's name, identification number, a statement certifying that the car was sold in an arm's-length transaction, the amount of gross proceeds from the sale and a statement that the donor may not deduct more than the gross proceeds from the sale. Exceptions - A taxpayer may deduct the auto's FMV if the charity intends to make "significant intervening use of" or "material improvement to" the car. Taxpayers may also take a deduction for the FMV of a vehicle if the charity sells the auto at a price significantly below FMV, or gratuitously transfers the auto, to a needy individual in furtherance of the donee organization's charitable purpose of relieving the poor and distressed or the underprivileged in need of transportation. Tax Document Retention Guidelines – You must always remember that the burden-of-proof remains on the taxpayer when it comes to supporting taxable income and deductions. This includes keeping accurate records to support entries on your submitted tax forms. In certain circumstances the IRS will allow you to estimate the amounts of deductions but these are very rare, so it is better to keep your records in a safe place. In cases where the IRS finds that you have not maintained adequate records to support deductions taken, they can assess a 20% penalty plus interest on the under-reported amounts, as calculated by the IRS. The IRS has a statute of limitations (SOL) on challenging income and deductions on filed tax returns of three years from the date filed or date due, which ever is later. However, they have a six year SOL if the income is under-reported by 25% or more and there is no SOL for returns that are not filed or are fraudulently filed. You should probably maintain your records for at least six years to be on the safe side and you should maintain records substantiating basis in assets or any carryovers for six years from the date of disposal or use, not acquisition.