Proper Documentation for Charitable Donations: Ensuring IRS Compliance
Posted by Jonathan Herdlein on November 14, 2024
If you itemize deductions and are charitably inclined, you may be entitled to deduct charitable donations. However, proper documentation is crucial to satisfy IRS requirements and secure your deductions.
Making Cash Donations
- Substantiation: Cash donations must be substantiated with bank records (e.g., bank statements, electronic fund transfer receipts, canceled checks, or credit card statements) or written communication from the charitable organization (e.g., a letter or email showing the donee’s name, contribution date, and amount).
- Additional Requirements for Larger Donations: For cash donations of $250 or more, a contemporaneous written acknowledgment (CWA) from the donee is required. This acknowledgment must include the contribution amount and a description and good faith estimate of any goods or services provided in return for the donation. The CWA must be obtained by the earlier of the extended due date of your tax return or the date you file your return.
Making Noncash Donations
- Substantiation for Smaller Donations: Noncash donations of less than $250 require a receipt from the donee, including the donee’s name and address, the date of the contribution, and a detailed description of the property.
- Additional Requirements for Larger Donations:
- Donations of $250 to $500 require a CWA.
- Donations over $500 but not more than $5,000 require a CWA and completion of Section A of Form 8283, which includes a description of the property, its fair market value, and the method of determining that value.
- Donations over $5,000 require all the above, plus a qualified appraisal of the property and completion of Section B of Form 8283, signed by the appraiser and the donee. For donations of art valued at $20,000 or more, or any donation over $500,000, a copy of the appraisal must be attached to your return. No appraisal is required for donations of publicly traded securities.
Additional Rules
- Specific Property Types: Additional rules may apply to certain types of property, such as vehicles, clothing, household items, or securities
Complexity of Regulations
- Importance of Compliance: The regulations on substantiating charitable donations are complex, and one mistake can cause you to lose valuable tax deductions. When in doubt, contact a professional to ensure you follow all the rules correctly.
If you have any questions or need further assistance, contact us.
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Jon joined Lumsden McCormick with twenty-five years of experience in the area of auditing, financial statement reviews, tax return preparation and compliance, and consulting services with a primary focus on commercial businesses, manufacturing and distribution, real estate, and employee benefit plans.