Documenting Your Charitable Tax Deductions
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As we all know, it’s important to get the details right when you are filing taxes. When it comes to charitable contributions, it’s even more important. The Tax Code doesn’t just require the paperwork to show the amount donated, it requires you to get the receipts on time—and those receipts must clearly specify that you did not receive anything in exchange for your donation. Without all those elements being in place, even a sympathetic Tax Court judge cannot help you.
This information is as important for you to know as it is for your favorite charity. If the charity doesn’t take care of its end properly, you and others like you will not continue to make donations.
When my father-in-law died, we tried to donate two nearly new electric wheelchairs to his church. The chairs, when new, cost over $10,000 each—so they were quite valuable and helpful items for a church full of aging members. And yet we had to send the paperwork back to the church four times before we got the correct information on the letter we needed to document the donation.
What do you need on the donation receipt or letter from your charity?
1) The name of the charity, its address, and its phone number.
2) The charity’s IRS taxpayer ID number. This is a nine-digit number configured as follows: XX-XXXXXXX.
3) A date from before you file your tax return—preferably with the year of the donation included. This is crucial. If this document is dated late, it will instantly cost you the entire tax deduction.
4) A statement that no goods or services were provided in exchange for your contributions. If you did receive something of value, the document must show the value. For instance, if you paid $500 a plate at a fundraising dinner, and the value of the food was $50, the receipt must show that you received $50 worth of value. That means that only $450 of your payment is deductible.
When you make any donation of $250 or more, it’s imperative that you get this documentation in each and every instance. It helps to keep copies of canceled checks or other proof of your donation. But without a timely receipt or letter from the charity, you will lose your tax deduction.
When it comes to vehicles and other non-cash donations, the rules get even more complicated. Read IRS Publication 526 and consult with your tax professional before making sizable non-cash donations.
Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.
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