Get The Receipt From The Charity In Writing Now

Do you remem­ber when you could esti­mate the amount of a cer­tain amount of giv­ing to a char­ity with­out hav­ing a lot of doc­u­men­ta­tion?  “I esti­mate I dropped $20 to the Sal­va­tion Army ket­tle, and another $5 per week to the church col­lec­tion, plus donated some clothes and other items val­ued at around $50… call it $330.”   Those days are long gone.

Cash Dona­tions: If you drop $20 cash in the bell ringers bucket, and they don’t give you a receipt, it is NOT a deductible donation.

Any­more even mod­est cash dona­tions can’t be deducted unless you have a can­celed check, credit card charge, bank state­ment or writ­ten receipt from the char­ity to sub­stan­ti­ate the deduction.

Fur­ther­more doc­u­ments prov­ing you made the char­i­ta­ble con­tri­bu­tion have to be con­tem­po­ra­ne­ous, mean­ing they have to be cre­ated at or near the time of the dona­tion; acknowl­edge­ments from the char­ity have to be received before the ear­lier of the date you file your taxes or the due date of the tax return includ­ing exten­sions.  If you receive a required writ­ten acknowl­edge­ment dated after you file, the deduc­tion may be denied in audit.

For dona­tions of cash, check or charge that are $250 or more you must have a writ­ten acknowl­edge­ment from the char­ity, or cer­tain pay­roll records, which indi­cate the date of the dona­tion and the amount.  Again the sub­stan­ti­a­tion (the proof that  you gave this money) must be con­tem­po­ra­ne­ous.  And it must be received before you do your taxes.

Non-cash Dona­tions: The sit­u­a­tion is more com­pli­cated when you donate non cash items.

If the value of non­cash dona­tions is under $250 a receipt of the dona­tion with the date, charity’s name & a rea­son­ably detailed descrip­tion of the goods donated-you don’t have to get a receipt in the case it is incon­ve­nient to do so (such as a char­ity drop box).  The key here is rea­son­ably detailed descrip­tion; I advise peo­ple to take pic­tures of the donated goods–dig­i­tal cam­eras make it easy, why take a chance?  Some other records needed to value the dona­tion maybe required as well.

If the value of the prop­erty exceeds $250 then the char­ity must sup­ply a writ­ten receipt, which also includes whether or not you received any ben­e­fit from donat­ing those goods and if so the Fair Mar­ket Value of that ben­e­fit, in addi­tion to the other doc­u­ments. Again this receipt needs to be dated and received before you file your taxes.

If the value of the prop­erty exceeds $500 then you need even more infor­ma­tion about the prop­erty you donated

• How you got it, pur­chase, gift, bequest, inheritance
• The approx­i­mated date you got it, or if you cre­ated it, when it was sub­stan­tially completed
• Its cost or other basis

Finally if the prop­erty donated exceeds $5000 you will need a qual­i­fied appraisal of that property.

Two recent cases before the IRS affirm the need to keep ade­quate sub­stan­ti­a­tion & get the writ­ten acknowl­edge­ment from the char­ity in a timely fashion.

Case 1: Ordi­nar­ily a tax­payer can deduct their out of pocket costs incurred on behalf of a char­i­ta­ble orga­ni­za­tion. In this case a woman was doing just that, she paid vet bills, for food and other expenses of feral cats she fos­tered for for a tax-exempt orga­ni­za­tion.  But she failed to get con­tem­po­ra­ne­ous acknowl­edge­ment of her large expenses from that orga­ni­za­tion.  The Tax Court ruled in favor of the IRS; she was not allowed to deduct those expenses even though she had other doc­u­men­ta­tion of them [Van Dusen, 136 TC No. 25].

Case 2: A donor made a large dona­tion to a non-profit orga­ni­za­tion, but the orga­ni­za­tion did not give him a receipt. In a Pri­vate Let­ter Rul­ing, even if the orga­ni­za­tion now amends its Form 990 acknowl­edg­ing the gift that will not suf­fice to OK the donor’s deduction.

As you can see from the tax­payer stand­point, doc­u­men­ta­tion includ­ing timely writ­ten acknowl­edge­ment from the char­ity is required for even mod­est donations. Charities should always acknowl­edge their donors, and do so quickly, espe­cially if they give more than $250.

As always, small busi­ness ser­vices and tax­a­tion are our busi­ness.  If you need help with this issue, or require other ser­vices,  Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

(602) 717‑0763