For consumers looking to build emergency money funds, giving to charity can help. Taxpayers can either donate cash or goods, but each one comes along with some rules via the IRS. For example, if a consumer donates money, they have to have paperwork and documentation to prove it. On the other hand, donating household goods has even more legwork attached. It’s important to know the rules and then use them, but wise consumers who do can, find considerable savings by donating to charity.

Using an IRA direct rollover

For consumers who are 70 ½ or older, they can have money directly moved from an IRA to the charity of their choice. Both traditional IRAs and Roth IRAs allow the move, but it is more beneficial to do it via a traditional type. The reason is that the money in these accounts is taxable, and lowering the balance lowers the tax liability. Money that goes straight to the charity is not considered taxable income when it comes to the IRA owner. The only drawback is that when money is moved directly to a charity from an IRA, it is not deductible by the consumer. It’s a small drawback though, and the difference may be negligible. In order to take advantage of the charitable donations, taxpayers have to itemize their filing. If a taxpayer does a rollover to the charity, the standard deduction still applies.

Household goods donations and taxes

Many charities accept household goods donations and taxpayers are allowed to claim the market value of donations on their taxes. In 2006, a new law was set in motion that requires items to be in “good or better” condition. The reason for the new law was to dissuade consumers from donating their junk and then trying to claim it on their taxes. The other reason is that too many consumers were valuing their items at too high a value and filing for a higher tax break than rightfully they should have. Finding emergency money to pay taxes is possible with the donating goods option, but the goods have to be valuable or the IRS can deem them “minimal monetary value” items and deny the claim.

Another rule to remember when it comes to donating goods is that when the donated amount exceeds $500, taxpayers have to file Form 8283 with their tax return. It is the Noncash Charitable Contributions document that details the item. Sure taxpayers can still increase the value of the item, but the IRS is hoping the extra paperwork discourages people from doing it. There may be additional follow-up questions to get through to avoid bulking up values.

Calculating a tax deduction

Taking the standard deduction, as opposed to itemizing, is a personal call. The first thing to look at is what amount of a standard deduction applies. For example, the standard deductions for 2010 are:

• Single taxpayers or married filing separately — $5,700
• Heads of households — $8,350
• Married couples filing jointly — $11,400

If a consumer has enough deductions to exceed the standard amounts, then he or she should itemize to get the bigger deduction.

Using charity to help limit tax liability

Emergency money to pay taxes is difficult to find, but charitable donations are one way to lower tax liabilities. Remember that there are some rules, though. Consumers need to remember that contributions only count when they are given to qualified organizations. This is especially important to remember during times of disaster when “charities” crop up asking for donations. They may not be qualified and donations may not be tax deductible at all. Consumers should check with the organization to make sure it is considered a qualified charity and then use the donations to bring down taxes. It’s a great way to save money and in today’s difficult economy, that’s crucial to staying within a budget.

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One of the easiest ways to find money now is to get a jump on filing income taxes. Many consumers wait until April to start gathering their paperwork together. They bring them to their tax preparer and want a rush job. The problem with waiting is that it opens the door for mistakes and it makes the time to get a refund that much longer. For anyone looking to get a jump on filing, here are some tips.

Getting ahead on taxes

The first thing taxpayers need to be aware of is Schedule M. Schedule M is a new tax document that is used to account for the “Making Work Pay” credit money received on paychecks. New payroll tables used last year created an extra $400 for single workers and $800 for married couples filing jointly. For some taxpayers, however, they may have paid too much into the fund. To correct the over-taxation, consumers have to file a Schedule M.

Secondly, it’s time to organize paperwork. January to mid-February is when W-2s and other tax-related documents start coming in. Consumers should create a special place for all tax documents. The needed information on these documents and having them in one place will make it all that much easier to fill out tax paperwork.

Thirdly, consumers need to double-check social security numbers. Though it sounds rudimentary, there are a surprising number of tax returns received without the correct numbers. It holds up processing and refunds for thousands of filers. Having the right number is critical because these numbers have so many transactions keyed directly to them. Everything from income statements to retirement plan contributions are recorded based on the social security number.

Fourthly, consumers need to make sure they receive the right filing package. The IRS package received is based on a taxpayers filing history, but that can change. Most documents can be retrieved online or at the post office or library. For taxpayers who had a major change, like marriage, it’s important to find the right documentation. Married couples looking for money now have to file with the right documents and in the right way.

Fifthly, consider filing electronically. Studies have shown that last year about two-thirds of all taxpayers filed electronically. According to the IRS, E-filed tax returns are processed in about 50% less time than paper ones. In addition, most software has a review portion of the program where entries are double checked for inaccuracies and possible mistakes. The good news for E-filers is that taxpayers may qualify to file for free. This season, taxpayers with adjusted gross income of $57,000 or less in 2009 will be able to file at no cost due to a program created by the IRS and the tax software industry.

Finally, taxpayers can sign up for direct deposit. It takes weeks for a paper return to reach the IRS office, be processed, the check to be cut, and then make it to the post office. On the other hand, it normally takes between 10 to 14 days for a direct deposit check to reach a bank account. Taxpayers who want direct deposit will have to file Form 8888, but it’s a great way to speed up the filing process.

Filing in 2010

Now more than ever, filing tax returns is being made simpler and simpler for taxpayers. Those concerned with receiving their tax return money now should follow the above tips to speed up the process. There are millions of tax returns that have to be reviewed and consumers looking for quick ways to file should use every advantage available.

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