PRECISE RECORD KEEPING REQUIRED ON ALL CHARITABLE CONTRIBUTIONS

Glenn Bailey, CPA

There have recently been a series of cases decided by the Tax Courts disallowing charitable contributions due to a lack of proper documentation about them. The rules here (under Code Section 170(f)(8)) are precise and strict:

  • Contributions of $250 or more must be supported by a written acknowledgement from the recipient organization dated prior to your return filing that states the amount of cash contributed and/or a description of any property other than cash,
  • A statement of whether or not the recipient provided any goods or services in consideration of the donation and if so an estimate of their value.

This also includes situations where you spend your money on behalf of an organization for service to the organization or travel or purchase of items for them.

The rule provides for no flexibility in allowing deductions without the proper acknowledgement. In more than one case the court has acknowledged that they believe the taxpayer made the donations claimed, but are unable to allow the deduction due to improper or missing support documentation. In one case the taxpayer obtained a qualified acknowledgement letter from the charity after his deduction was questioned. The court was unable to accept this letter since it was not issued before the return was filed.

We see many instances of inadequate or improper documentation receipts, some from large national groups. Please be sure and obtain qualified receipts from all your donations at the time you give them. That is your best opportunity to get the right information. If your return is examined, there is no second chance to get a proper receipt.

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