Tax Breaks to Those Who do Volunteer Work for Charity:  You should be aware that you may be entitled to some additional itemized deductions if you are a volunteer worker for a charity.  Although no tax deduction is allowed for the value of services you perform for a charitable organization, some deductions are permitted for the out of pocket costs you incur while performing the services.  These deductions are subject to the deduction limit that generally applies to charitable contributions.  This includes items such as:

•    Away-from-home travel expenses while performing services for a charity: out-of pocket round-trip travel cost, taxi fares and other costs of transportation between the airport or station and hotel, plus lodging and meals.  These expenses are not deductible if there’s a significant element of personal pleasure associated with travel, or if your services for a charity involve lobbying activities.
•    The cost of entertaining others on behalf of a charity, such as wining and dining a potential large contributor (but the cost of your own entertainment or meal is not deductible).
•    If you use your car while performing services for a charitable organization you may deduct your actual unreimbursed expenses directly attributable to the services, such as gas and oil costs.  Alternatively, you may deduct a flat fourteen cents per mile for charitable use of your car.
•    You can deduct the cost of a uniform you wear when you do volunteer work for the charity, as long as the uniform has no general utility (e.g. a volunteer ambulance worker’s jumpsuit).  You can also deduct the cost of cleaning the uniform.

No charitable deduction is allowed for a contribution of $250 or more unless you substantiate the contribution by a written acknowledgement form the charitable organization.  The acknowledgment generally must include the amount of cash, a description of any property contributed, and whether you received anything in return for your gift.  This presents a problem when you as a volunteer make a contribution on behalf of, rather than directly to a charity.  One way around this is for the charity to pay for the expenses, itself, and then be reimbursed by you (or you can make the donation before the expenses is incurred).  If this isn’t possible, you can safeguard your deductions as follows:

•    General written documentation from the charity about the nature of your volunteering activity and the need for related expenses to be paid.  An example is if you travel out of town as a volunteer, get a letter from the charity explaining why you’re needed at the out-of-town location.
•    If you are out-of-pocket for a substantial amount, you should submit a statement of expenses and preferably, a copy of the receipts, to the charity, and arrange for the charity to acknowledge in writing the amount of the contribution.
•    You should maintain detailed records of your out-of-pocket expense-receipts plus a written record for the time, place, amount, and charitable purpose of the expenses.

General Tax Return Record Keeping:  Well- organized records will make it easier to prepare your tax return, help you answer questions if your return is selected for examination, or help prepare a response if you are billed for additional tax.  Records such as receipts, canceled checks, and other documents that support an item of income or a deduction appearing on your return should be kept until the statue of limitations to assess tax when a return is fraudulent or when no return is filed.  The time to assess is 6 years from when the return is filed if income that you should have reported is more than 25% of the gross income shown on the return.  The period to file a claim for credit or refund generally is 3 years from the date the original return was filed, or 2 years from the date the tax was paid, whichever is later.  There is a 7 year period from when the return was due for filing a claim for a loss from worthless securities.  An employer must keep all employment tax records for all employment tax records from at least 4 years after the tax become due or is paid whichever is later.  Generally a business has no particular method of bookkeeping that must be used.  However, a business must use a method that clearly and accurately reflects the gross income and expenses.  The records should substantiate both income and expenses.

Employees or /Contract Labor:  It’s critical for a business to periodically review the status of its workers and see if they are properly classified.  An enterprise must withhold federal income tax, social security taxes, and federal unemployment taxes on wages it pays workers who are employees.  It also may have to provide them with the same fringe benefits and retirement plan coverage available to its other employees.  There may be state tax obligations as well.  However, these responsibilities don’t apply for workers who are independent contractors.  The business simply cuts them a check for their services and sends them a Form 1099-MISC.
Under the “common law” rules developed by the courts, a worker generally is an employee for federal tax purposes if the employer has the right to control and direct the worker regarding the job he is to do and how he is to do it.  The employer doesn’t have to actually direct or control how the services are performed; It’s enough if the employer has the right to do so.  IRS usually applies the following factors to see if the employer has the right to direct and control the worker:

•    A worker who must comply with instructions about when, where, and how he or she is to work is ordinarily and employee.  This control factor is present if the business has the right to make the worker follow instructions.  However, instructions regarding government standards are given little weight, as is the absence of instructions for professionals such as attorneys, who must follow the rules of their profession.
•    Training a worker by teaming an experienced employee with the worker, by corresponding with the worker, by requiring him or her to attend meetings, or by using other methods, indicates the business wants the services performed in a particular method or manner.  Ongoing training is a particularly strong sign of an employer-employee relationship, but orientation or information programs about company policies aren’t.
•    Integration of the worker’s services into the business operations generally shows the worker is subject to direction and control.
•    A business that hires, supervises, and pays assistants for a worker is exhibiting employer-like control over the worker on the job.  Conversely, and independent contractor relationship is indicated if a worker is contractually obligated to hire, supervise, and pay assistants.
•    A continuing relationship between the worker and the business indicates and employer – employee relationship exists.  A continuing relationship may exist where the worker is called in at frequently recurring, although irregular, intervals.
•    The fact that a business requires work to be performed on its premises suggests control over the worker (if the work could be done elsewhere).  Work done off the premises, such as at the worker’s office, indicates some freedom from control.  The importance of this factor depends on the type of services involved and whether an employer generally would require employees to do similar work on its premises.
•    A business exhibits control over a worker if it requires him or her to perform services in a specific order or sequence.
•    A business’s requirement that the worker submit regular or written reports indicates a degree of control over the worker.
•    Payment by the hour, week, or month generally points to and employer-employee relationship, if this method of payment isn’t just a convenient way of paying a lump- sum agreed upon as the cost of a job.  Payment by the job or on a straight commission basis generally indicates a worker is an independent contractor.
•    A business exhibits characteristics of an employer if it supplies a worker with significant tools, materials, and other equipment, or ordinarily pays the workers’ business and / traveling expenses.
•    A worker exhibits independent contractor status if he or she invests in facilities that aren’t typically maintained by employees (e.g., renting his or her own office).  By contrast, and employee usually relies on the employer to provide the facilities needed to do the job.
•    A worker who can realize a profit or suffer a loss as a result of his or her services generally is an independent contractor, but a worker who can’t is and employee.  The risk that a worker won’t be paid isn’t factored in.
•    A worker who performs more than minimal services for a number of unrelated businesses at the same time generally is an independent contractor.  However, a person who works for more than one business may be an employee of each business, especially where the businesses are part of the same service arrangement.
•    The fact that a worker makes his or her services available to the general public on a regular and consistent basis indicates and independent contractor relationship.
•    The right to fire a worker is a factor indicating that he or she is an employee.  An independent contractor on the other hand, can’t be fired as long as he or she produces the work that was contracted-for.