One of the more creative things you can do with tax return preparation is donate household items to charity. Donating your used belongings is a total feel-good procedure.

Your donated items qualify for a tax deduction if you follow a few simple rules.

• You must be able to itemize your deductions on Schedule A of your tax return in order to get the tax benefit of donating items to charity. Don’t let the fact that you can't itemize stop you from donating used items to charity. If you don't itemize your deductions, you can still clean your closets and donate to charity - you just won't see a tax benefit. And the argument, "I would clean my house if only I could itemize my deductions," doesn't carry much weight with friends and relatives who won't visit because your house is a mess.
• To qualify for a tax deduction, you must donate the items to a charity that is recognized as such by the IRS. Typically the group to which you make the donation will either re-sell the items and give the proceeds to programs for needy people, or they will donate the items directly to the needy.
• Places like the Salvation Army, Goodwill, and various veterans' groups are obvious choices and these groups are often willing to come to your door to pick up donated items. Churches, schools, libraries, and hospitals are other good outlets for your donations.
• If you are uncertain if your donation to a particular group qualifies as tax deductible, just ask. Members of the group will know if the group is able to authorize tax deductions.
• Document your donated items. I know it's a pain, but take the time to make a list of all the items you donate. You don’t have to be terribly precise: "One red shirt, one blue shirt, two yellow shirts," is a bit of overkill when "Four shirts" will do. But "Three bags full" is not specific enough, unless you're writing nursery rhymes.
• Get a signed receipt from the charitable organization to which you donate. The receipt should include the name and address of the organization, the date of the donation, a general description of the items donated (here's where "three bags full" is an appropriate description, as is "clothing and books," "four boxes of household items," and so on). Also, the receipt should contain a statement that you received nothing in exchange for your donation.
• The IRS requires that you obtain a receipt if the value of the items you donate is $250 or more. Even if the value is less than $250, it still is wise to keep a receipt for your records. The receipt and your list of items stay with you - they do not get attached to your tax return.
• The final step in the donation process is valuing your donation. Figure out how much the donation is worth so you'll know how much you can take as a tax deduction. Used items are rarely worth as much as you expect. Cast off items face a heavy markdown in the resale market. Even items you purchased new and never used are going to be marked down to resale prices in a second-hand store. Your donation value is the price the items will fetch in the resale market.

Garage sale prices are a fair indication of the amount you can deduct. Visit resale shops like those run by the Salvation Army and other groups to get a good idea of the worth of your items. There are geographic differences when it comes to pricing items for resale. Second-hand shops in larger metropolitan areas may charge more for items than those in rural areas. Also the quality of your item should be considered when making a valuation. A threadbare sweater will be worth far less than a newer-looking fluffy sweater. Pants with a tear will be out-priced by those that are intact.

A study released by the National Bureau of Economic Research, demonstrated how 401(k) funds set aside for retirement and tax deferred when earned, may end up actually costing the investors more in tax dollars than if the funds were taxed at the time they were earned.

Low- and middle-income workers might be most victimized by a potential retirement scenario in which income from mandatory withdrawals from a 401(k) plan pushes the taxpayer into a higher tax bracket, raising the marginal tax rate and potentially hiking to 85% the amount of Social Security benefits that are subject to income tax.

Workers who invest in 401(k) plans assume they will be in a lower tax bracket when they retire. By deferring the tax on the income that is deposited in 401(k) plans, and on the earnings of these plans, workers assume they will save money.

The study points out that often taxpayers are experiencing high deduction years at the time when they are earning money which is placed in tax deferred funds. By reducing their income with the 401(k) deferral plan, these workers may lower their tax bracket and thus inadvertently reduce the value of their tax deductions.

The main point of the study is that financial planning for retirement is a complex matter and many angles must be considered. Copies of the study are available for $5 from the National Bureau of Economic Research.

The Treasury Department and the Internal Revenue Service announced initial administrative tax relief for individual and business taxpayers who are unable to meet their federal tax obligations because they were affected by the terrorist attacks in September.

The IRS and Treasury are providing relief to all taxpayers - regardless of where they reside - who are directly affected by the terrorist attacks. For example, this includes relief workers, the victims on the airplanes, taxpayers whose place of employment is in a disaster area, and taxpayers with records maintained in a disaster area.

In addition, the agencies are providing relief to all taxpayers in the five boroughs of New York City declared disaster areas by the President. They are also providing relief to taxpayers located in Arlington County, Virginia, home of the Pentagon, which was declared a disaster area today.

In the aftermath of the tragedy, the IRS and Treasury want to assure taxpayers, businesses, and tax practitioners that they are working aggressively to monitor the situation and resolve other potential tax administration issues as they are identified.

Affected taxpayers who have an original filing deadline between September 11, 2001, and November 30, 2001, have an additional six months plus 120 days of time to file that return and make any payment due with that return. Taxpayers that are currently on an extension of time that expires between September 11, 2001, and November 30, 2001, will have an additional 120 days to file that return.

Affected individual taxpayers who face an estimated tax payment date on September 17, 2001, may postpone that payment by including the amount with their final estimated payments for Tax Year 2001, which are due on January 15, 2002.

Affected corporate taxpayers who face an estimated tax payment after September 10, 2001, and before January 15, 2002, may postpone that payment until January 15, 2002.

In addition, for six months the IRS will suspend many enforcement activities - such as levies, seizures, and summonses - for affected taxpayers.

Taxpayers who are entitled to the relief described above should add the following designation in red ink at the top of the returns they file: "September 11, 2001 - Terrorist Attack." If they receive a notice from the IRS, they should contact the IRS as indicated on the notice to explain why they are entitled to relief.

Although the IRS cannot extend the deadline for employment or excise tax deposits, the IRS will provide relief for businesses unable to make these deposits because of the terrorist attacks. The IRS will waive penalties on tax deposits required to be made by these businesses between September 11, 2001, and October 31, 2001, if those deposits are made by November 15, 2001.

Due to the unprecedented scope and breadth of this tragedy, the agencies will continue to monitor the situation and may issue additional guidance as appropriate.