As the end of tax year 2013 fast approaches, taxpayers are projecting their 2013 tax liability and determining how much they should donate to their favorite charities. One thing that donors often overlook is the recordkeeping requirement (or adequate substantiation) for charitable donations.
Donors (not the charities they donate to) are responsible for ensuring that proper records are kept for charitable donations that they make. Without proper substantiation, donations will be deemed nondeductible by the Internal Revenue Service (IRS). Proper substantiation depends on the amount of the donation and whether the donation is cash or noncash (e.g. clothing, housewares, stocks).
For a cash donation of $75 or more in which the donor receives goods or services in exchange for the donation, the charity must provide a statement to the donor that reports the value of such goods or services. The donor can deduct the excess of the contribution over the value of the goods or services received. These are called quid pro quo contributions.
For cash donations of $250 or less, adequate records include:
- Written communication from a charity
- Bank records (e.g. bank statement, EFT receipt, canceled checks)
- Credit card statements
- Text message/phone bill (the phone bill needs to show the name of the charity, the date of the contribution, and the amount donated)
For cash donations of $250 or more, proper acknowledgement must include:
- Amount of cash donated
- A disclosure indicating whether or not the charity provided any goods or services to the donor in consideration for any cash or property. If goods or services were provided to the donor, a description and good faith estimate of the value of such goods or services must be disclosed.
You can confirm if an organization is eligible to receive tax-deductible contributions by going to http://www.irs.gov/charities/article/0,,id=249767,00.html on the Internal Revenue Service’s website.
Schneider Downs is prepared to assist taxpayers in understanding the recordkeeping requirements for charitable donations and to assist charities with complying with the substantiation requirements. If you have any questions or require assistance, please do not hesitate to contact Susan M. Kirsch at email@example.com or Debra A. Ries at firstname.lastname@example.org.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.