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Keep Your Records, Keep Your Deduction

01 March 2013
Written by Marion Ruthig
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According to Kiplinger’s article “IRS Audit Red Flags: The Dirty Dozen,” the chances of being audited or otherwise hearing from the IRS depends upon various factors... They go on to discuss twelve red flags with number three being “Taking Large Charitable Deductions.” 

“We all know that charitable contributions are a great write-off and help you feel all warm and fuzzy inside. However, if your charitable deductions are disproportionately large compared with your income, it raises a red flag. That's because IRS computers know what the average charitable donation is for folks at your income level. 

Also, if you don't get an appraisal for donations of valuable property, or if you fail to file Form 8283 for donations over $500, the chances of audit increase. And if you've donated a conservation easement to a charity, chances are good that you'll hear from the IRS. Be sure to keep all your supporting documents, including receipts for cash and property contributions made during the year, and abide by the documentation rules.” - Kiplinger


You may be saying to yourself that your deductions are not very large, so you don’t have to worry. All I have to say is -- “Better to be safe than sorry!” 

Here are some things to keep in mind out of IRS Publication 526, “Charitable Contributions”  –

  • An organization generally must give you a written statement if it receives a payment from you that is more than $75 and is partly a contribution and partly for goods or services.
  • For cash contributions less than $250, you must keep ONE of the following:
    • A bank(canceled check, credit card statement, bank or credit union statement) showing the name of the qualified organization, the date of the contribution, and the amount of the contribution
    • A receipt (or a letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution.
  • For cash contributions greater than $250, you must keep -
    • An acknowledgment of your contribution from the qualified organization that -
      • Is in writing
      • Includes the amount you contributed, whether the organization provided goods or services as a result of the contribution, and a description and good faith estimate of the value of any goods or services
      • And you must get it on or before the earlier of:
        • The date you file your return for the year you make the contribution, or
        • The due date, including extensions, for filing the return
  • For noncash contributions less than $250-
    • If you make any noncash contribution, you must get and keep a receipt from the charitable organization showing:A letter or other written communication from the charitable organization acknowledging receipt of the contribution and containing the information in (1), (2), and (3) will serve as a receipt.
      • The name of the charitable organization,
      • The date and location of the charitable contribution, and
      • A reasonably detailed description of the property.
    • You are not required to have a receipt where it is impractical to get one (for example, if you leave property at a charity's unattended drop site).

You must also keep reliable written records for each item of contributed property including the following information:

  1. The name and address of the organization to which you contributed.
  2. The date and location of the contribution.
  3. A description of the property in detail reasonable under the circumstances
  4. The fair market value of the property at the time of the contribution and how you figured the fair market value. If it was determined by appraisal, you should also keep a copy of the signed appraisal.
  5. The cost or other basis of the property, if you must reduce its fair market value by appreciation. Your records should also include the amount of the reduction and how you figured it.
  6. The amount you claim as a deduction for the tax year as a result of the contribution, if you contribute less than your entire interest in the property during the tax year. Your records must include the amount you claimed as a deduction in any earlier years for contributions of other interests in this property. They must also include the name and address of each organization to which you contributed the other interests, the place where any such tangible property is located or kept, and the name of any person in possession of the property, other than the organization to which you contributed it.
  7. The terms of any conditions attached to the contribution of property.

Need more information? Read the entire Publication 526, “Charitable Contributions” (http://www.irs.gov/publications/p526/index.html) and consult your tax advisor.