Donation Acknowledgements

Nearly everyone who itemizes deductions on their tax return takes a deduction for donations made to charities.  The IRS pays attention to these deductions on audited returns.  Taxpayers can protect those deductions with a few easy steps.

The tax code requires charities to issue a written acknowledgment for donations received in excess of $250.  That acknowledgement must show the name and address of the charity, the date of the contribution, the amount of cash or description of property donated (but not an estimate of value of non-cash donations), and a list of significant goods or services received in return, or specifically state that none were received.

The tax code further requires that a taxpayer must have this acknowledgement before taking a deduction for a charitable contribution.  That is, it must be in the taxpayer’s possession before the return is filed.  Someone having their return audited a couple years down the line cannot go back to the charity and request a new copy.  In short, no receipt or acknowledgment means no deduction.  So, it is imperative to follow up with charities you donate to and be sure you receive the acknowledgments.

There are additional rules for the donation of higher price items including vehicles, securities, and artwork.  Those rules are too lengthy to go into here, but it is definitely worth your while to review these rules with your tax professional before making the donation to ensure you know what documentation to have in place.

Greg Tanner – is a Tax Principal at Wertz & Company, LLP, a Professional Services Firm located in Orange County, CA that specializes in working with entrepreneurs along their journey to success.