Tax Write-offs for Charitable Work - TIME

[boojum]

I record a local chorale for free. I do the recording, the mix, master and handle the design of the labels, inserts, etc., arrange for and follow up the production/duplication. In short, I handle the deal from their mouths to the finished product. I see that IRS allows this work the be taken as a deduction. I am not amortizing the gear, just my time.

So, if anyone else does this how do you arrive at a fair figure for an hourly rate? I cannot charge what the pro's would. But what would be a starting point for a way to value out my time? I will contact the IRS for what is fair to claim in terms of time, but assigning the value is what I would like to figure out.

If you feel like saying "nothing" please suppress that urge.

Thank you for any help you can provide.

[hbphotoav]

Originally Posted by boojum

I record a local chorale for free. I do the recording, the mix, master and handle the design of the labels, inserts, etc., arrange for and follow up the production/duplication. In short, I handle the deal from their mouths to the finished product. I see that IRS allows this work the be taken as a deduction. I am not amortizing the gear, just my time.

So, if anyone else does this how do you arrive at a fair figure for an hourly rate? I cannot charge what the pro's would. But what would be a starting point for a way to value out my time? I will contact the IRS for what is fair to claim in terms of time, but assigning the value is what I would like to figure out.

If you feel like saying "nothing" please suppress that urge.

Thank you for any help you can provide.

According to my accountant, donations purely of time are not deductible, as there is no way to assign a trackable, justifiable value. If the client pays me my fee and I return a check for that fee, it's a wash for me (claim the income, claim the deduction, net zero). Goods, cash donations, and, perhaps, rental fees on equipment you are amortizing as a part of your business might qualify. Or, perhaps you could assign a "retail" value to the CDs equivalent to your time and materials costs, get the client to agree to the total, and issue a donation letter. And, of course, be certain they supply you with their 501c3 or other documentation that they are a qualified non-tax entity.

But by all means, talk to a qualified tax accountant before you make the attempt.

Let us know what you find out...

[canopener]

I recently did a free-be for a registered non-profit. They offered me the tax donation deal but stipulated that I would have to submit an itemized bill for my time before they could issue it. I just made up a bill and parsed it using time for composing, pre-production, recording, mixing and mastering as I recall. I used an hourly rate of something or other until it added up to what I would have charged for an actual package deal. My accountant didn't even blink. So far the IRS hasn't either.

Hope that helps.

[boojum]

^^^^^^ This is my understanding on the "how-to" end of it. I would not normally do this because I normally do not have enough income to report. But I took a chunk from my IRA last year and need some write-offs to offset this. Two different CD's for the chorale and a set of four for the state historical society could put me back into the "no tax" category.

Which brings me back to my initial question, what is a fair hourly rate for a newcomer for me to charge? I want to be fair. And I do not want to test the IRS. I have always found them fair and decent. I wrote them a check for $15K which bounced and explained to them why and added they were the last people I would write a bad check to and ignored the penalties and interest. They accepted my argument as fair and honest, which it was.

So, guys, you are the sole source I can count on for this. Again, please resist the impulse to say I haven't the huevos to charge for my work.

Thank you

[hbphotoav]

Charge whatever... "fair" is whatever your local market will bear at the competence level you provide. However, if you have no history or basis of billing, whether $10 an hour or $250 an hour for audio services, and didn't keep a fairly precise log of your time, it will be difficult to convince an auditor of your worth, and of the validity of the "donation." It's tough to say "John charges $XX, so that's fair..."

... so PLEASE get actual advice from an actual tax lawyer or accountant... preferably one used to dealing with freelance self-employed types. Your "understanding" and a single past less-than-painful experience are not viable defense in an audit... and a large, one-time donation of time (especially after cracking your IRA) is, to put it mildly, somewhat of a red flag. And for goodness sake... create a valid paper trail. "Fair" is well and good... IRS deals in legal jots and tittles. And invoices. And receipts. And logs.

This is not the time to be creative or "close to the line"... the federal government have a lot of recent unfinanced spending to attempt to cover from the 50% of us who do pay income tax... and if you're in the 15% bracket (earning taxable income up to $68,000), and claim a $1,000 donation as a write-off, the most it could possibly affect your bottom line would be a savings of $150. That pays for about an hour of legal or business accounting fees. Do be careful.

Sorry to be a squeaky wheel. My first business accountant in the early '80s was a former IRS enforcement auditor. Some lessons stick. Like glue.

[boojum]

^^^^^ Point taken.