We all know that we have to have documentation to back up any deduction or expense that we take on our tax returns. Of course, that goes for any charitable deduction we take on the Schedule A- Charitable deductions. But it is also important for us to make sure that the receipt we receive for donations over $250 meets the IRS requirements. If it doesn’t, we need to get the 501(c)(3) organization to make changes to their receipt.
For a charitable contribution under $250 to be deductible on the Schedule A, the taxpayer must have a receipt or canceled check to prove they made the donation. Spare change dropped into the Salvation Army pot or given to a child collecting for UNICEF is no longer a deductible contribution if there isn’t a receipt given.
A contribution over $250 must have a contemporary receipt from the receiving organization (IRC 170(f)(8)(A)). The receipt must show how much was contributed, cash or the value of the property, if the donor received any goods or services as part of their donation and the value of the goods and services received. For example, a taxpayer who contributes $300 to their local Public Broadcasting TV station and receives as a thank-you gift a DVD of a movie should receive a receipt with the total amount of the donation, the fair market value of the DVD (say $25) and how much of the donation actually qualifies as a charitable donation. In this case, $275 can be included as a Schedule A charitable deduction.
What if you receive a receipt that doesn’t include all that information when you make the donation? You can get the organization to re-issue a receipt as long as you have not filed the return taking the donation. Once the original 1040 return has been filed, the receipt can’t be considered contemporary and can’t be used to document the donation.
It would also be a good idea for those who work with tax exempt corporations that qualify as 501(c)(3) organization to look at their current receipt and make sure that they meet the requirements of TC Memo 2012-140. It’s easier to change the receipt’s wording than to handle an irate donor who has to pay more tax because the IRS disallowed their deduction.