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TAX PLANNING


ItsDeductible

09/13/01 10:52:11 AM PST
by Amy Wu

ItsDeductible

INCOME DYNAMICS, INC.
13911 Gold Circle
Omaha, NE 68144-2376
Phone: 800 976-5358
Fax: 402 330-4574
Internet: www.itsdeductible.com
Product: Software-based contribution tracker for fair market values on Irs Form 8283 items.
Minimum requirements: Windows 95/98/Me/NT/2000
Price: CD-Rom $29.95 plus shipping and handling, or online without delivery fee.

Two summers ago, in the spirit of the dotcom frenzy, I announced to friends and colleagues the formation of my new web company: amysegarage.com. And thus, Egarage was born on a muggy July afternoon. In reality, I found myself sitting in my driveway for the better part of a day, looking at the forlorn artifacts of my real garage sale. About noon, I began to become impatient. Not a single visitor had come to my sale since I began hauling things out of the basement two hours ago. Sure, I could've put up the traditional signs, but hey! It being the Internet era, I decided to be modern. Being modern consisted of me sending e-mails entitled "E-garage sale! Buy my stuff or I will never speak to you again." This didn't go over very well. I even tried some threatening telemarketing:

"Hey, Schnee [my best friend], want to buy something from my egarage sale? Delivery is free."

"Sure, I love Tiggers. Do you have any stuffed Tiggers?"

"Uh... I have a little stuffed buffalo from Yellowstone."

"A buffalo? Well, I don't know. How about bears?"

"What do you have against buffalos?"

"I don't want your old buffalo."

"Buy my buffalo or I will never speak to you again."

Needless to say, the $214 I eventually made by assaulting the neighbors was not worth the six hours of heat or wrath. So why share this tragic tale? Because Income Dynamics, Inc., has a new product called ItsDeductible (no, the apostrophe is not supposed to be there) that gets you at least twice the savings for your old stuff, minus all the hassle. You can even partake in a little altruism along the way.

IT IS DEDUCTIBLE

The ItsDeductible business model is really simple. If you donate to charity — the Salvation Army, Goodwill, Toys for Tots, and so forth — ItsDeductible will track and calculate the fair market value of your donations. For instance, pants that your kids have outgrown have a market value of $10, provided they're in relatively good condition. This may not seem like much, but think of just how many pairs of pants you've accumulated over the years. Taking into consideration old books, clothes, and furniture you may be trying to ge rid of, it wouldn't be at all surprising to tally more than $1,500 in donations. But why not just sell your stuff instead of claiming a deduction? Because on average, people tend to undervalue their possessions ("Who would want this old thing?"). Taking into account the cost of time and the hassles, trying to be a seller is just not worth your while most of the time. But charitable donations allow you to give to people who really do need your old things, and let you save exactly the amount you've given.

ItsDeductible provides the necessary tax forms (Form 8283) for when you itemize your income tax return. (Realize, however, when the software totals the fair market value, it is under the assumption that you bought your items for greater than that value.) The product also comes with a guarantee that you get a full refund if you don't save at least $100.

In addition, while the software provides up-to-date information based on Irs guidelines, these guidelines change yearly. Once you buy the software, you will have to update it annually, though you do get a 20% discount as a previous customer. The CD-Rom costs about $29.95 (plus shipping and handling) and runs on any Windows version 95 and above. It isn't Mac-compatible, but you can purchase the book version from www.itsdeductible.com. In addition, check out the website if you want a free demo before buying. The demo gives a run-through of the product and a little tutorial to boot.

INSTALLATION AND RUN

Installing ItsDeductible was exceedingly easy. I popped in the CD, Windows found it, Windows installed it. If your system doesn't detect the software at first, simply run the program Setup.Exe. The ItsDeductible interface is colorful and simple to manage. It follows an Excel-like folders format with tabs for donations, personal info, charities, and reports. When you use the program for the first time, you will be prompted for your personal information. This includes your state and federal tax rates, so that an estimated savings can be calculated. A second prompt asks you for the names of the charities you've donated to, along with other germane information. Once you've filled in the necessary info, you can start organizing all the items you've donated.

Not only that, there are categories and subcategories for almost anything you could have possibly owned. If you want to specify something that's not listed, you can add an item with your own description. This includes donations to art museums or special gifts. Donations don't have to be clothes or furniture; they can also be out-of-pocket, mileage, or monetary expenses. If you give a cash donation, or if you drive for a church group, these both count as tax deductions. For every item, you select whether that item is in good, fair, or poor condition. Separate prices appear for each selection and a running total will appear on a spreadsheet-type format.

Irs Form 8283 is for noncash charitable contributions. There are also several publications (526, 551, 561) that outline valuation of property, donations, and basis of assets. The software already uses these guidelines to calculate the fair market values, but they are there for your reference. When you've finished reporting all your donations, you can fill out the Form 8283 directly from the program. A final tally of your deduction total and your savings total is shown in the final report. The software allows you to update, edit, and clear all information if you need to make any changes.

SUMMARY

I totaled more than $1,700 in donations at a savings of more than $700. Thinking back to my pathetic garage sale, this leaves me a little irked. Oh, well. It'll only make me more eager to be a pack rat in the future. ItsDeductible is a great way to save more on your tax returns and do something good while you're at it. If you feel funny about all the savings you get, well, you can donate those too.

Amy Wu is a student at Princeton University.



Amy Wu

Amy Wu is a student at Princeton University, majoring in economics and financial engineering.

Title: Editorial, Intern
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