IRS Posts Charitable Deduction Tips

Monday, August 12, 2013

IRS Posts Charitable Deduction Tips

Over the last few years, IRS auditors have been focusing on charitable contributions. The IRS is always suspicious that taxpayers are inflating their charitable deduction amount (I first wrote about this on my 3/1/12 blog titled IRS Declares War on Charitable Contributions). Failing to follow the strict letter of the tax law and IRS regulations will result in your deduction being disallowed.

The IRS recently posted a reminder on its website featuring nine tax deduction tips (IRS Tip 2013-45 04/01/13):

To qualify for a deduction, you must make the donation to a qualified charitable organization. You can’t deduct contributions made to an individual, a political organization, or a candidate.
A taxpayer must file Form 1040 and claim itemized deductions on Schedule A. They must also must file Form 8283 for non-cash charitable deductions that exceed $500 for the year.
If you receive a benefit of some kind in return for your contribution, you can only deduct the amount that exceeds the fair market value of the benefit you receive. An example of this is reducing your donation by the value of a meal you receive at the event.
Donations of stock or other non-cash property are usually valued at fair market value. Used clothing and household items need to be in good condition. Special rules apply to vehicle donations.
Fair market value is generally the price you would receive if you sold the item.
You must have a written record of your donation to deduct any cash gift, regardless of the amount. The documentation should include the name of the organization and the date and amount of your contribution.
For gifts above $250, you must obtain a written statement from the qualified organization detailing the amount of the cash donation or a description of any property given. It must also state whether the organization provided any goods or service in exchange for the gift.
You may use the same document to meet the requirements of a written statement for any cash gift and a written acknowledgement for contributions of $250 or more.
If a taxpayer donates one item or a group of similar items that are valued at more than $5,000, Section B of Form 8253 must be completed. Be sure to obtain an appraisal from a qualified professional before making a donation of this size.

Monday, August 12, 2013 in Business Profit & Cash Flow Tips, Business Success Series, Cash Flow, Income Taxes, Small Business Owners, Small Business Success Series, Surviving an IRS Audit Series | Permalink

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The IRS recently posted a reminder on its website featuring nine tax deduction tips (IRS Tip 2013-45 04/01/13):

To qualify for a deduction, you must make the donation to a qualified charitable organization. You can’t deduct contributions made to an individual, a political organization, or a candidate.
A taxpayer must file Form 1040 and claim itemized deductions on Schedule A. They must also must file Form 8283 for non-cash charitable deductions that exceed $500 for the year.
If you receive a benefit of some kind in return for your contribution, you can only deduct the amount that exceeds the fair market value of the benefit you receive. An example of this is reducing your donation by the value of a meal you receive at the event.
Donations of stock or other non-cash property are usually valued at fair market value. Used clothing and household items need to be in good condition. Special rules apply to vehicle donations.
Fair market value is generally the price you would receive if you sold the item.
You must have a written record of your donation to deduct any cash gift, regardless of the amount. The documentation should include the name of the organization and the date and amount of your contribution.
For gifts above $250, you must obtain a written statement from the qualified organization detailing the amount of the cash donation or a description of any property given. It must also state whether the organization provided any goods or service in exchange for the gift.
You may use the same document to meet the requirements of a written statement for any cash gift and a written acknowledgement for contributions of $250 or more.
If a taxpayer donates one item or a group of similar items that are valued at more than $5,000, Section B of Form 8253 must be completed. Be sure to obtain an appraisal from a qualified professional before making a donation of this size.