IRS and the Reduction Act — and how a fund at CCCF can help
November 30, 2022
Projected increases in the IRS’s ranks may be raising more advisors’ and clients’ eyebrows than actual tax hikes. The much-anticipated Inflation Reduction Act is now law, and while the Act did include changes to a few income tax provisions, many tax professionals are viewing the Act’s $80 billion in funding increases for the IRS to be the bigger headliner.
Some commentators worry that the IRS still may not be able to build its staff and update technology as quickly as the legislation anticipated. Nonetheless, financial advisors, attorneys, and accountants are taking note. In all likelihood, shoring up the IRS’s operations means that the chances of client audits will increase. Your clients may even be reading up on this in the mainstream media, which frequently cites unusually large charitable deductions as a potential trigger for an IRS audit.
Now is the time to make sure your clients understand the rules for charitable deductions and commit to keeping track of their donations in detail. Establishing a fund at the community foundation is an easy way for clients to organize and track their annual giving.
Some clients, for example, make a single, tax-deductible transfer of highly-appreciated stock each year to their fund at the community foundation. The proceeds from the sale of that stock are then used for distributions from the fund to the client’s favorite charities. In this situation, no matter how many different charities benefit from the fund, the client still has just one receipt to keep track of charitable donations for income tax deduction purposes.
Please reach out to learn more about ways the community foundation can work with you and your clients to navigate the ever-changing economic factors that influence their charitable giving plans.