Throughout the year, many taxpayers contribute money or gifts to qualified organizations eligible to receive tax-deductible charitable contributions. However, taxpayers who plan to claim a charitable deduction on their tax return must do two things in order to properly support their claim on their federal income tax returns:
- Have a bank record or written communication from a charity for any monetary contributions showing the name of the charity, the date of the contribution and the amount of the contribution; and
- Get a written acknowledgment from the charity for any single donation of $250 or more.
Although it’s a taxpayer’s responsibility to obtain a written acknowledgment for any single donation of $250 or more, a charitable organization oftentimes assists a taxpayer by providing a timely, written statement containing the following:
- The name of organization;
- The amount of cash contribution;
- A description (but not the value) of non-cash contribution;
- A statement that no goods or services were provided by the organization in return for the contribution (if that was the case);
- A description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution;
- A statement that goods or services, if any, that an organization provided in return for the contribution consisted entirely of intangible religious benefits (if that was the case).
While a taxpayer should not attach the acknowledgment to his or her individual income tax return, the taxpayer must retain it to substantiate the contribution.
With respect to charitable contributions larger than $250, taxpayers should remember the following six guidelines about these donations and written acknowledgements:
- Taxpayers who make single donations of $250 or more to a charity must have one of the following:
- A separate acknowledgment from the organization for each donation of $250 or more; or
- One acknowledgment from the organization listing the amount and date of each contribution of $250 or more.
- The $250 threshold doesn’t mean a taxpayer adds up separate contributions of less than $250 throughout the year.
- For example, if someone gave a $25 offering to their church each week, they don’t need an acknowledgement from the church, even though their contributions for the year are more than $250.
- Contributions made by payroll deduction are treated as separate contributions for each pay period.
- If a taxpayer makes a payment that is partly for goods and services, their deductible contribution is the amount of the payment that is more than the value of those goods and services.
- A taxpayer must get the acknowledgement on or before the earlier of these two dates:
- The date they file their return for the year in which they make the contribution.
- The due date, including extensions, for filing the return.
- If the acknowledgment doesn’t show the date of the contribution, the taxpayers must also have a bank record or receipt that does show the date.
Charities depend on the generous support of the community to provide services to those in need. However, a taxpayer must follow the IRS’s written acknowledgement requirement to support a charitable deduction for any donations in excess of $250. Without it, a deduction may be challenged and result in additional taxes being owed. Remember no good deed goes unpunished (unless you get a written acknowledgement).