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Documenting Your Charitable Contribution

Tax and Financial News

March 2000

Documenting Your Charitable Contribution

If you have donated more than $250 to a charity in the year 1999, make sure you have a letter outlining your contribution. If you contributed more than $250, your cancelled check may not be enough to satisfy the IRS.

There are three primary types of contributions. There is good old cash, non-cash and provision of services. When you make cash contributions, you can deduct the amount given as long as you have not received anything in return.

If you claim $500 or more, you will need to use the Form 8283 and complete Section A. You must insure that the IRS has certified the recipient as a qualifying 501 ©(3) organization, and that the charity has furnished you with a receipt or a letter.

If you claim the value of your donation to be $5000 or more, you must have a written appraisal from an expert, and complete Section B of Form 8283.

It is your responsibility and not the charity’s to determine and prove the fair market value of the contribution if the IRS asks. When your charitable contribution is a provision of a service, you cannot put a monetary value on the time you give – for instance, deduct an “hourly rate” for your labor or expertise – but you can deduct for related supplies you purchased and for travel expenses. Meals and lodging can also be deducted.

Big ticket items
Cars and boats seem to be the most typical contributions worth more than $5000. If you give a car to a charity and plan to take a tax deduction, get an independent appraisal from a car dealer in writing before giving away the car. If the car is worth less than $5000, the IRS will accept the “Blue Book” value but it does not hurt to have extra ways to show the value. A photo is a great thing to show the IRS. Attach classified ads for a similar car from the newspaper around the time of your donation. If a charity takes the car you donated to an auction or sells it for “scrap” and the IRS felt like inquiring into what the charity really received for your donated car, your contribution may be in question. One way to avoid this would be to sell the car or boat yourself and then donate the proceeds.

Documentation of large contributions to charities will help your CPA fill out the required forms and make sure you get the deduction. A whole other subject is which charities are real. The Internet has a host of charities trying to get you to donate to them. Check with the Better Business Bureau to find out if they are for real. If you get a call on the phone from a charity looking for your dollars, check them out also. The IRS wants you to donate to your fellow man and created the write-offs to thank you for your generosity but remember large deductions are a “red flag” to an IRS examiner. However, the IRS is auditing fewer people these days. When it comes to tax audits, the odds are better then ever that you would dodge the bullet. The audit rate has declined to less than 1% of tax returns.
 

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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