Changes to charitable donations

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‘Tis the season to give. The holidays insight everyone’s generosity in the form of extra giving. The prospect of a last-minute tax deduction does not hurt either. Make sure your clients know what they need to document to support charitable donations. The increased requirements could lead to many missed deductions.

A concurrent written acknowledgment must be in the hands of the taxpayer prior to filing their income tax return. The code requires a written acknowledgement for any donation of $250 or more, including cash donations.

Taxpayers must receive the written acknowledgement with the following information included:

  • The amount of cash and a description of any property other than cash contributed
  • Whether the donee organization provided any goods or services in consideration, in whole or in part, for any such property
  • A description and good faith estimate of the value of any such goods or services

A recent court case throughout a taxpayer’s substantial donation because the gift agreement failed to comply with the above-written requirements. Even though a written agreement was in place that clearly outlined the gift, the court upheld the IRS’s position that three specifically required pieces were not all included.

Failure to obtain written documentation of donations can be an easy miss for taxpayers, especially when they are quick to oblige holiday giving. Consider sending a newsletter or reminder to your clients to start seeking donation letters now and ensure they know what should be included if they intend to rely on the letters for deduction purposes.

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