When you're considering making donations to community or charitable organizations, it's really easy to get caught up in the great feeling that you're doing something wonderful in the world. Unfortunately, many business owners or managers don't fully consider the legal and financial ramifications until after they've completed the donation process. Here are a few reasons why you should always get equipment appraisals before making that donation.
Benefit from Your Equipment Donations: Why a Machine Valuation is Vital
Get a better picture of what you're donating.
Sure, you saw something similar go at auction for about $5,000 last month, but was it really a comparable piece of equipment? Maybe the charity you're working with "knows a guy" who can provide an estimate of value for your receipt. Unfortunately, if you don't have a certified machine valuation, you don't have legal proof of the donation's actual value in many cases. When it comes time to split up a company or deal with an audit, you may be accused of intentionally dumping the company's assets instead of having to split them or pay taxes on them.
Provide documentation of donations to the charitable organization.
Many charitable organizations work with donors who will provide additional funding or matching funds once a particular goal has been met. Instead of providing them with a piece of machinery with an assigned minimum value, wouldn't you rather provide them with the actual value so they can take advantage of what those donors or matching foundations have to offer? Having a certified value gives you and the charitable organization more flexibility in what you do with that equipment appraisal.
Have that important piece of paper when the IRS comes knocking.
Every business owner dreads the possibility: the IRS audit. If you've made a donation of valuable equipment but don't have legal proof of its actual value from a certified machinery appraiser, the IRS can accuse you of dumping assets to lower your tax liability. Unfortunately, this is because companies have done this in the past. If an oil company has a banner year and knows they need new equipment, they can donate the old equipment to show a loss of assets before investing in new equipment in the new year.
If you've already donated, it's not too late to get an appraisal!
Have you already donated that equipment? Don't panic! There are legal methodologies that allow a certified machine appraiser to provide you with a backdated value for equipment that has already been donated. This type of appraisal will take into account market and industry conditions at the time the donation was made, allowing you to take advantage of the tax benefits of your donation without the risk of an IRS audit or of undervaluing your equipment. A past donation like a powered electric wheelchair to the ALS is something that can be handled through this process. Make sure the appraiser is a Qualified Appraiser in the eyes of the IRS and that they regularly sign off on IRS 8283 forms.
Now that you know what to expect, make an appointment with a certified equipment appraiser before making donations to that wonderful 501c3 that you've been wanting to help along. By knowing your equipment values and having a certified machine appraisal in hand, you're ready to make a change for the better in our world while documenting exactly what has changed hands.