A Higher Bar Than You Think: Documenting Charitable Contributions

Years ago, the general rule was that all you needed for proof of a deducted charitable contribution was your cancelled check. However, over the years, the IRS has realized that many people attend fundraising events during which the attendees receive a benefit in return for their ticket price.

Charitable golf tournaments, dinner dances, wine tastings, etc., are all ways that charitable organizations raise money, meet new donors and build relationships. But if you pay $300 to play golf at some fancy golf club in a tournament that benefits a local charity, should you be able to deduct the $300? Many say “yes” because they would not have paid $300 to play a round of golf if it were not an event that benefited the local charity.

However, didn’t you receive something in return for your $300? You probably had lunch, played golf on a beautiful course, used a golf cart and then had dinner in the evening. While you may not have received $300 of value in return for your check, you did receive, perhaps, $100 of golf and meal value. Therefore, congress and the IRS believe that you should only deduct $200 of your $300 admission price.

And the IRS says that if you do not have something in writing from the charity that attests to the fact that $200 of your $300 admission ticket is deductible, you cannot deduct any of it. Furthermore, you need to have this documentation in your hands when you file the returnyou cannot get it from the charity two years later, when your return is being audited by the IRS.

Currently, the charity is not obligated to provide this documentation to you. It is up to you to obtain the appropriate documentation for each gift to charity that equals or exceeds $250. And remember, you need to have this documentation before you claim the deduction. For your 2015 contributions, you need to have the written documentation in your hands by April 15, 2016. A Boston CPA firm that I have done some work for explains this very well on its website. On page nine of this document, the firm even provides you with a sample receipt. You can print this and provide it to your charities to help them help you document your deductions.

You may have read that the IRS recently proposed allowing charities to file a form (similar to the 1099 forms filed by banks) that would tell you and the IRS the amount of charitable contributions received from individuals. This is only in the proposal stage, and will not be available for the 2015/16 tax filing season. If this is implemented, and if your charity opts to make this filing (it will not be mandatory) you will receive a form from your charity each January and the IRS will receive a copy so they can match your deduction with the information received directly from the charity. Sounds like a reasonable idea that will help many people.

But Senator Pat Roberts of Kansas has filed legislation to block this effort by the IRS. The senator does not want the IRS to have any more information about citizens than it currently has (which is substantial). He does not believe the IRS can be trusted to safeguard donors’ personal information. Some charity regulators and industry groups also oppose the change, arguing that it would open the door to fundraising scams and identity theft.

Therefore, for 2015 and the foreseeable future, be sure you understand the documentation regulations for your charitable gifts and obtain the appropriate documentation from your charity at the time you make the donation. If you are a charity employee or a donation officer, consider adopting policies and procedures that assure that your charity provides donors with the appropriate documentation before they even ask you for it. That is great donor relations!