Preface: The rules governing the substantiation requirements for claiming a charitable deduction are complicated and require patience to analyze exactly which rule applies for the type and value of property contributed.
Recordkeeping for Donations to Charity
One of the requirements for claiming a tax deduction for a contribution to a charitable organization is that you have to be able to prove it. The rationale is clear, but the rules for compliance are very detailed and the cost of running afoul of them can be substantial. For example, in a case from 2017, the Tax Court disallowed a $33 million deduction when the donor neglected to include the necessary records with the donor’s tax return. In a case from 2016, the Tax Court disallowed a $65 million deduction because the donor failed to obtain an acknowledgment of the gift from the charity.
To a large degree, the burden of complying with the rules lies with the donor, and it is certainly the donor who bears the most risk if the substantiation requirements are not met. However, an organization that receives charitable contributions has its own set of requirements and can be subject to significant penalties if those requirements are not met.
As a starting point, a donor who intends to claim a tax deduction for a charitable contribution must first make sure that the organization is eligible to receive charitable contributions. Most eligible organizations are listed in the Tax Exempt Organization Search, available at www.irs.gov…….
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Credit: Douglas A. Smith | Tax Attorney.
Doug is a tax attorney who represents individuals and small business owners in the Lancaster area in IRS audits, appeals, and deficiency proceedings. He frequently secures favorable collection alternatives for clients that involve installment agreements or offers in compromise. He has experience dealing with liens and levies, penalty abatement, innocent spouse relief, substantiating business expenses, foreign bank account reporting, trust fund recovery penalty, identity theft, and many other tax matters.