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SUBSTANTIATION - WHAT IS THAT ALL ABOUT?

  Print Version

By Amber Kocher, CPA Manager

Have you seen articles about the IRS disallowing tax deductible contributions because of a lack of substantiation? Well, that substantiation or support/proof for the charitable contribution is very important and will be the difference between receiving a charitable deduction or not. Recently, a Financial-Planning.com article entitled "Tax Season Warning: $25K Donation Deduction Denied" by Donald Jay Korn depicted an actual scenario that can happen to anyone without proper support for a charitable deduction. Click here to read the article.

What proof do you need for your charitable deduction?

  1. Bank record or written communication from the charity for any monetary contribution.
  2. Written acknowledgement for single contributions over $250 or more.
  3. Written disclosure for goods or services received in exchange for payment over $75.
  4. Acknowledgement should be received by the time the tax return is filed.

Bank record = cancelled check
Written communication = receipt or letter from the charity
Tax Return = individual federal income tax return

Written acknowledgment must include:

  1. Name of Organization
  2. Cash Contribution Amount
  3. Non-cash contribution description
  4. Statement that no goods or services were provided in return for the contribution
  5. Description and good faith estimate of the value of those goods or services in #4

Typically, organizations should send out acknowledgements no later than Jan 31 following the year the donation was made, but absolutely no later than the due date of the return including extensions. As mentioned in Donald Jay Korn's article the "goods and service statement" is very important and was the technicality that cost the taxpayers their deduction.

For more information or assistance with cash or non-cash charitable deductions contact your Blue advisor.

Sources:

IRS Substantiation and Disclosure Requirements and IRS Publication 1771

IRS Charitable Contribution Deduction information and IRS Publication 526

 

 

If you have any questions regarding the article above or any other issue affecting your not-for-profit organization please contact your Blue & Co. advisor or e-mail us at blue@blueandco.com or call us at 800-717-BLUE

 

Please visit our website at http://www.blueandco.com for more information regarding the services we provide.

CIRCULAR 230 DISCLOSURE: To ensure compliance with recently-enacted U.S. Treasury Department Regulations, we are now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including any attachments, is not intended or written by us to be used, and cannot be used, by anyone for the purpose of avoiding federal tax penalties that may be imposed by the federal government or for promoting, marketing or recommending to another party any tax-related matters addressed herein.


 

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