Congress Passes Haiti Aid Bill

In a seemingly rare display of bipartisan effort by both chambers of Congress, Democratic and Republican leaders in the House and Senate joined an effort to quickly pass legislation that allows U.S. taxpayers to deduct their Haiti aid donations on their 2009 income tax returns. The Haiti Assistance Income Tax Incentive
Act passed through both chambers unanimously and was signed into law on Friday,
Jan. 22. The measure is geared toward promoting additional donations to the
relief efforts for the island nation, which was stricken with a magnitude 7.0
earthquake on January 12.

The provisions of the act allow taxpayers to claim charitable deductions on
their 1040 income tax returns for donations made to charities until March 1.
It is similar to a bill passed shortly after the 2004 Indian Ocean Tsunami.

According to a press release issued by House Majority Whip James E. Clyburn
(D-S.C.) and House Minority Whip Eric Cantor (R-VA), the two have introduced
legislation to “allow individuals who make contributions to the relief
effort in Haiti to claim the donations as an itemized charitable deduction on
their 2009 tax return.” They are joined by other influential House leaders,
including Ways and Means Committee Chairman Charles Rangle (D-N.Y.) and the
ranking Republican member on that committee, Dave Camp (R-MI).

“In the midst of this horrific disaster, we must do everything we can
to help the people of Haiti and the aid workers working so feverishly on the
ground to help them,” said Cantor. Congressman Clyburn added: “I am
heartened by the outpouring of concern and resources from the American people
to the crisis in Haiti.” Similar legislation has been proposed in the Senate.

Tax and accounting professionals, as well as the technology companies that
produce tax programs and online preparation systems, are well-accustomed to
last minute tax law changes at the state and federal level. Most programs continue
to offer updates through the end of January to accommodate for these changes.

Fortunately, the changes to allow deductions made until April 15 for donations
to Haiti relief efforts should not likely to involve significant changes to
the actual tax filing programs used by do-it-yourself taxpayers or professionals.
This is because the IRS will not need to change existing forms, but will instead
issue official guidance to taxpayers and professional preparers. As a result,
many of the technology companies that make tax return programs will likely make
minor changes to their instructions regarding charitable giving. These changes
will be available via program updates. For users of SaaS (web-based) preparation
programs, any changes would be made automatically by the online program developers.

The notion of making charitable donations retroactively deductible to help
promote giving is not new. In early 2005, the U.S. Congress passed similar legislation
following the December 26, 2004, tsunami in the Indian Ocean. That event was
spurred by a magnitude 9.1 earthquake off the coast of the Indonesian island
of Sumatra.

“It’s great to encourage donations for humanitarian efforts, especially
because a lot of people have taxes on their minds right now, so it might encourage
additional giving,” said Jody L. Padar, a Chicago CPA with the firm James
J. Matousek, CPA Ltd. (www.matousekconsulting.com).
“The biggest issue for many taxpayers is to remember not to “double
dip,” or mistakenly take the deduction again in 2010. They also need to
save their receipts.”

Certain advances in technology have also benefited charities and taxpayers.
The popularity of mobile phone text messaging has made it quick and easy for
people to donate funds, with a record of more than $25 million having been contributed
via text message to the Red Cross (www.redcross.org)
during the six days following the disaster. This is in addition to more than
$200 million donated to the organization via other methods. “The cool thing
about texting donations is that taxpayers definitely have documentation of the
donation on their cell phone bill,” said Padar.

To make a text-based donation to Haiti relief efforts, mobile phone users can
can text the word “Haiti” to 90999 to instantly send a ten dollar
donation to the Red Cross. The donation is automatically added to the user’s
billing statement and most major mobile service providers have waived text messaging
fees for those making these donations.

Although the tax season is already officially underway, most taxpayers do not
file until the months of March and April. Padar notes that taxpayers who may
have already filed or who remain unaware of the special treatment will still
be able to claim the charitable giving on their 2010 returns or, if desired,
will be able to file an amended 2009 return.

Technology