Misleading clothing donation boxes

I learned about for-profit clothing drop boxes a couple weeks ago when my parents told me about a bright red donation dumpster they saw in a shopping center parking lot. When they red the fine print, they realized the drop box was not sponsored by Goodwill, the Salvation Army, or another charity, but a for-profit company that donated a tiny percentage of its profits to charitable causes. The practice is misleading at best, illegal at worst.

Clothing recycling boxes

While some companies solicit clothing donations under the guise of charity, others—like U’SAgain—are unashamed to be collecting your old clothes and making a buck.

Unscrupulous charities

Finally, there are even some non-profit organizations soliciting clothing donations that you may want to avoid. Planet Aid is one such company that has drop boxes in certain locations around the country and brags supporting a variety of causes in Africa. There are allegations, however, that Planet Aid, U’SAgain, and other clothing recyclers have links to criminal organizations.

Whether or not the group skirts the law, annual reports reveal that just 11 percent of Planet Aid’s income goes to charity. While non-profit organizations cost money to operate, it seems reasonable to question just how Planet Aid spends the other 89 percent.

How do you find a legitimate charity that accepts clothing donations?

While many charities may be able to put your garments to good use, the Salvation Army and Goodwill are two widespread and reliable charitable recyclers. With some exceptions, however, these groups are likely to have fewer stand-alone drop boxes. To donate clothing, you may have to drive to a thrift store or staffed drop location.

Locate a Salvation Army or Goodwill clothing donation site now.

So much for stimulating the US economy personally, although I hope others do. Today that $600 is only worth €393, which won’t go far away from home. But an economic boost just may nudge that exchange rate back up a bit before summer.

How are you spending — or saving — your tax rebate?

I swear, I’m not actually so nerdy that doing my taxes is my idea of a good time, but it does feel great to have them done. (April 14th has often been a long night for me in years past).

This was the first year I used TaxCut Pro. I used to go over to my parent’s house to use the copy of TurboTax my dad buys each year, but last year I forgot paperwork — twice — and had to go back and forth to finish my return. I opted for the convenience of doing everything online, and to pay the $44.95 (for federal and state). TaxCut Pro also offers a $14.95 package for a simple federal return only or $19.95 for a full federal return.

TaxCut did a fair job of walking me through the basic steps (entering W2s, determining deductions), although I don’t think it asked as many questions as TurboTax. Since I have spent time researching tax issues that pertain to my return this year, I knew where to click, and so I think I got my return done with TaxCut faster than I would’ve with TurboTax. However, I think the average filer may benefit from TurboTax’s thoroughness.

One other complaint about TaxCut: I do not think it explained an error it found on my federal return well. In an IRA rollover I entered my contribution as $1 more than my withdrawal, triggering an error. But based upon the description of the error provided by TaxCut, I had to look at it three times before I caught what was wrong.

The other nice thing about TaxCut is the included audit support — hope I never need it, but it seems like a good insurance policy.

How are you doing your taxes this year? Are you done?

You may be able to deduct that loss and beef up any refund you are owed. But be careful: Deduct a business loss for more than a couple years in a row and you may be flagged for a painful audit.

The IRS has recently caught on to taxpayers utilizing self-defined business losses to reduce their total income and, subsequently, their tax liability. As a result, the IRS has instituted the so-called hobby loss rule.

There is no way to easily distinguish between a for-profit business and a not-for-profit hobby. Whether you are a photographer who shoots weddings, a musician who plays a few gigs, or a blogger with advertising revenue, whether you earn $1 a year or $100,000, your side work could be considered either: a business, or a hobby.

The question you need to ask yourself before deducting losses on your taxes: Do I anticipate making a profit from this venture 3 out of the next 5 years?

If you can answer yes – if your current losses are due to the normal start-up phase of a business, or are the result of factors outside of your control – then proceed with deducting the loss.

If you answer no – if you think you will take a loss more years than not – in an audit the IRS will consider your venture a non-profit hobby. If push comes to shove, however, you can still attempt to prove that you are a business using the following criteria:

1. You carry on the activity in a businesslike manner,
2. The time and effort you put into the activity indicate you intend to make it profitable,
3. You depend on income from the activity for your livelihood,
4. Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business),
5. You change your methods of operation in an attempt to improve profitability,
6. You, or your advisers, have the knowledge needed to carry on the activity as a successful business,
7. You were successful in making a profit in similar activities in the past,
8. The activity makes a profit in some years, and how much profit it makes, and
9. You can expect to make a future profit from the appreciation of the assets used in the activity.

Fail to meet these criteria, your loss deductions will be disallowed, and you will have to pay back taxes plus penalties and interest.

Tomorrow’s tax article will deal with estimated tax payments vs. additional withholdings for part-time entrepreneurs. You may also be interested in these related posts:

Don’t Miss These Important Tax Deductions

Shoeboxed.com: Receipt Organization a la Netflix

Will You Get Your Economic Stimulus Tax Rebate Check?

Student Loan Interest – If you have student loans and an adjusted gross income of less than $65,000, you can deduct the interest you paid – up to $2,500. This deduction is counted as an income adjustment, and is available even if you do not itemize your deductions. Your student loan lenders should mail you a statement of your total annual interest paid, or it will be printed on the first loan statement of the new year.

Moving Expenses – If your job (or a new one) required you to move more than 50 miles, you can deduct certain moving expenses as an adjustment to your income. This deduction is a key example of why receipt organization comes in handy for everybody, even if you don’t itemize your deductions. Need to get your receipts in order? Check out Shoeboxed, the mail-in receipt scanning service.

Gambling Losses – Did you have a lucky trip to Vegas last year? If so, the IRS is going to demand its cut, if they haven’t taken it already. You can reduce your tax liability on gambling winnings, however, by claiming gambling losses as a deduction. There is a catch. You can only deduct losses up to the amount of the winnings you reported and paid taxes on. Lost your shirt last year? Sorry, you still owe taxes on all the money you blew.

State Taxes –This one is pretty hard to miss, but don’t forget to deduct your state income taxes. Live in a state that doesn’t have income tax? You can deduct state sales tax instead. Another great reason to keep those receipts organized!

College Tuition – Are you in school, even part time? You might be able to deduct up to $4,000 you paid in college tuition you paid for yourself, your spouse or a dependent – even if you do not itemize.

Charitable Contributions – While you probably won’t overlook any checks you cut to charity last year, did you know that other expenses for charitable causes – even if they are not direct donations – are deductible? This can include mileage driving to volunteer, the ingredients for something you baked for a fundraiser, or supplies you purchased to advertise a charitable event.

Do you have any favorite deductions? I’d love to hear them!