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Donation Optimization and a tax bill

I have a couple where one earns $50,000 and the other earns $30,000 plus we have over $4,000 in donations. The lower income taxpayer has a tax bill and the higher income has a refund. Optimization puts the donations on the higher income return (and I understand that as generally the best results are achieved that way.)

In this case, the combined bottom line is the same no matter who claims the donations, so why not eliminate the bill and get two refunds by giving the donations to the lower income taxpayer.

More importantly, we are now past the filing deadline so penalties and interest are added. Therefore, applying donations to the higher income taxpayer will NOT be optimal once those are considered.

I know the software is complex. But I also hate overrides which is my only solution to avoid the penalties and interest.

(One of the things I miss from Cam’s last software product is the ability to move one or all donations to the spouse WITHOUT overrides. Can’t we bring back that option?)

You can change the optimizations to adjust for refunds. You can also move the donations by changing who gets what percent in the optimizations although it does it in the chart below and not in the lines where you typed in the donations. Keep in mind you do get more tax back over all if all the donations are claimed on one return as the first $200 results in a lower tax credit.

I think you may have missed the question posed here a bit Laurie. Helga knows she can get to the point she wants to (by shifting all donations from one spouse to the other, not by splitting the donations
between two as you infer). She is saying that shifting donations between spouses REQUIRES an override (or shutting off) of the optimizer. I think part of the solution here may be building into the optimizer a sequence that says, if the net family amount payable
is the same regardless of who claims ALL the donations, then claim the donations on the party that owes the most tax, rather than who has the higher income. That is my opinion anyway.

If you turn off “Optimize Donations” on the Optimization worksheet, each spouse can then claim their own donations.

And, if you right click on any donations line, you have the option to transfer that donation to the spouse, just like in the other software you mentioned!!

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That also requires an override and I think that is where issues arise for some of us. I tend to feel an override is something I shouldn’t be doing. I do it regularly though in certain instances although I would prefer if I was just changing a yes to a no without the override. The most common being optimizations I don’t like the choice of taxpayer chosen or the result of the optimization. CAI commons to mind this year.

I meant if you tick the optimization box to maximize refunds I think it does this. It should claim all the donations on the taxpayer that owes money regardless of which page the donations were typed in. I’d think that optimizations should do this anyway and I agree with Arlis that you should not have to override the optimizations to No in order to do so when you don’t want to use the optimizations.

Laurie, to change the optimization, you have overrides. Those were not necessary in another of Cam’s software products. Yes, I moved 100% of the donations to the spouse.

As I stated above: the combined bottom line is the same no matter who claims the donations,…

I am in my 4th decade as a practitioner and over two decades as an entrepreneur.

Bryan, you got it!

Cameron, I don’t know when that became available but I missed it. Thanks!

Cameron, can we add transfer ALL donations

A number of my clients give monthly or quarterly to organizations that issue a receipt for each donation as opposed to annual receipting so I frequently have 20 or more.

Lauire, in my case, moving all the donations did not change the combined bottom line. However, in Alberta, for example the 2019 provincial amount is over $19,000 as compared to the federal amount.of just over $12,000. In some cases, the provincial portion of the donation would quickly be lost as the provincial tax was already at zero.In this scenario, I would weigh the cost of penalties and interest against splitting the donations and look for the the best solutions using the multiple variables (Be sure to check filing history before guessing the penalty amount.).

There already is a “transfer all” option. Right-click on the donation table and you will see the transfer options.

As for topic, if someone wants to claim a different amount other than the optimized amount, it can be a bit messy. On the Optimizations worksheet, if I said “Yes” to “Claim a different amount?” to things like RRSP, TaxCycle will respect the “Different amount to claim”. If I do that for Donations, the “Amount claimed” column continues to calculate the optimized claim as opposed to using the “different amount to claim”. I then need to override the “optimize” field to “no” (which I don’t have to do for other credits/deductions.

Ultimately, I would prefer not shuffling donations between taxpayer and spouse on the table and would rather have an input box to say Taxpayer claims X and Spouse claims Y in those circumstances where you want something different than TaxCycle’s optimization (which, the aforementioned fields on Optimization worksheet should accommodate but they don’t work for donations).

And generally speaking, it would be cool if optimizations in general did shuffle credits that can be claimed by either taxpayer or spouse to the person that has tax owing if the other has a refund.

Sorry for piggybacking off your post for my additional comments! :smiley: