by Roger Russell
Mountain View, Calif. - Intuit’s acquisition of Income Dynamics advances the execution of its multi-year strategy to drive growth in TurboTax by providing different taxpayer segments with a full range of “Right for Me” solutions.
Income Dynamics Inc. is the Omaha, Neb.-based provider of ItsDeductible software, which provides tools to help taxpayers to determine the fair market value of items they have donated to charities.
“Income Dynamics’ ItsDeductible software is an excellent fit for Intuit and our ‘Right for Me’ TurboTax strategy,” said Steve Bennett, Intuit’s president and chief executive officer. “Customers can use the software to quickly and easily obtain the fair market values of hundreds of donated items - including clothing, toys and household goods. This enables taxpayers to stop guessing and claim the full deduction to which they’re entitled.”
Tax practitioners have long known that they can save their clients time and embarrassment - and probably money - by advising them to forgo the traditional garage sale and donate their used items to charity. ItsDeductible allows them to assign values to the donated property which are formulated in the way the Internal Revenue Service specifies.
“Charitable giving is one of the primary areas in which taxpayers don’t claim the full tax benefit due to them,” noted Chrys Sullivan, H&R Block’s senior product manager of software.
“This is one of the most overlooked deductions,” agreed Lynbrook, N.Y.-based CPA William Marino. “It’s troublesome for most people because it’s hard to establish a value. Often, people just put down ‘six bags of used clothing’ and come up with their own value, and it’s not signed by the charitable organization. To get the proper substantiation, they need to itemize and have the charitable organization sign the receipt.”
According to the Internal Revenue Service, more than one-third of all taxpayers itemize their deductions, and approximately 89 percent of that group makes charitable deductions. An even higher proportion of TurboTax customers itemize their deductions.
“We offered ItsDeductible software to TurboTax customers this past season through a partnership with Income Dynamics and were very happy with the results,” said Bennett. “Customers told us the software made their taxes less taxing - and saved them money.”
The IRS says, in Publication 561, that for used clothing and other personal items, the value is “usually far less than the price you paid for them. Valuation of items of clothing does not lend itself to fixed formulas or methods.”
It also says that for used items, a taxpayer should claim as the value the price that buyers of such items actually pay in used clothing stores, consignment or thrift shops.
ItsDeductible values are compiled by using a patented technology to capture millions of Internet transactions. It then combines these figures with a nationwide network of manual data collection from the Salvation Army, Goodwill and consignment stores. Using this information, a fair market value is established for thousands of commonly donated items.
The purchase of Income Dynamics sets the stage for Intuit to package ItsDeductible with their professional solutions software.
“It won’t be included as a feature in our professional products in year one,” said company spokesperson Julie Miller. “It was just too complicated to go from acquiring the product in July 2003 and integrating it for the upcoming season’s software. It will still be sold separately at retail and through the TurboTax product.”
“But we’ve created an integration team from across Intuit to look into how we can leverage the technology and software,” she added. “I would expect that adding this functionality to our professional products is something they will consider.”
Scott Gulbransen, communications manager for TurboTax, said that ItsDeductible would still be available in both its workbook form and a CD version. “A lot of taxpayers still use the book. Not all of them are TurboTax customers - they may use the workbook and still see a tax professional,” he said.
ItsDeductible has been allied with both Intuit and H&R Block in previous years. H&R Block now has its own software, DeductionPro, which provides values for charitable donations of non-cash items. Both ItsDeductible and DeductionPro provide additional functionality, with features such as tracking and reporting, quick item search capability, receipt and tax form printing, donation tracking and estimated tax savings.
The latest version of DeductionPro has expanded its valuation database by 40 percent, according to H&R Block communications manager Tom Linafelt. “We’ve broadened the realm of items we provide valuations for and made them more succinct,” he said.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access