February 12, 2013
Tax Season Warning: IRS Scrutinizing Charitable Donation Receipts
If you do not receive the proper documentation, your charitable deduction could be denied.
The IRS has been taking a stricter stance on taxpayers properly documenting charitable contributions and adhering to substantiation requirements as set forth in Internal Revenue Code Section 170. The IRS plants the responsibility for maintaining proper documentation on the taxpayer, so it is important that you are familiar with what information is required.
In a recent case, a taxpayer contributed $25,171 to their church taking it as an itemized tax deduction. Their contribution consisted primarily of checks written to the church in amounts larger than $250. Although they DID receive a year-end statement from the church acknowledging its receipt of the contributions, the IRS challenged their deduction on the grounds that the statement from the church did not meet the statutory requirements.
The Tax Court sided with the IRS because the year-end statement provided by the church did not indicate whether any goods or services were provided in consideration for their contributions.
According to Section 170, for any contribution of $250 or more, the written acknowledgement must contain the following:
- The amount of cash and a description (but not the value) of any property other than cash contributed.
- Whether the organization receiving the donation provided any goods or services in consideration, in whole or in part, for any cash or property that was contributed.
- A description and good faith estimate of the value of any goods or services received by the donor or if such goods and services consist solely of intangible religious benefit.
If you made charitable contributions larger than $250 and have received receipts that are missing any of the required information, you should contact the charity and ask them to provide the information in writing. There are additional appraisal requirements when a donation of property (other than publicly traded securities) exceeds $5,000.