This topic represents one of those rare moments in life when two ostensibly unrelated things one happens to be interested in unexpectedly collide – in this instance, animal rescue and taxes.
In 2010, Jean Van Dusen, a volunteer with an Oakland, CA based non-profit called “Fix Our Ferals,” took on the IRS in U.S. Tax Court. The IRS wanted to disallow her deduction for $12,068 in expenses she had incurred while fostering over 70 cats in her home. Ms. Van Dusen, a now retired family law attorney, felt the costs incurred were a legitimate charitable expense, so she decided to fight back.
This past June, the Tax Court finally handed down their verdict. Ms. Van Dusen was stunned to find out she had won her case. This is not only a victory for Ms. Van Dusen, but for all the other thousands of animal-rescue volunteers like myself, who incur significant expenses on behalf of IRS-approved charities by fostering animals in our homes.
I have to admit this is the first opinion of a U.S. Tax Court I’ve been motivated enough to read cover to cover. The interesting thing is that although the Tax Court deemed Ms. Van Dusen’s expenses as legitimate non-cash, charitable deductions, the majority of them were ultimately disallowed on a technicality (my word choice, mind you, not the IRS’) because she didn’t have a letter in hand from the charity acknowledging her contributions in excess of $250. In short, she failed to meet the IRS’ recordkeeping requirements and thus missed out on taking the majority of the deductions the court otherwise deemed perfectly valid.
If only Ms. Van Dusen had worked with a knowledgeable CPA or an animal-loving, Chapel Hill financial planner, she might have been made aware of this requirement and actually been capable of financially benefiting from the deductions she worked so hard in court to legitimize. This small oversight cost her big money!
If you’re a wealth management client of Woodward Financial Advisors, you already know that we review your tax returns every year. Though we’re not CPAs, we do carefully scrutinize clients’ returns for the types of errors and omissions that might be obvious to us, but not to you as the taxpayer. On at least a couple occasions, finding these mistakes has either completely paid for or substantially offset our fee. Now that’s what I call a value proposition!
The bottom line is that the tax and investing landscapes are constantly changing. How in the world can someone who doesn’t do this for a living possibly be expected to keep up? The answer, of course, is that they can’t and that’s why they hire a financial planner and CPA to do the keeping up for them.