Documenting your charitable gifts
Charitable donations allow you to give and take—you give money or property to a qualified charity and then take an income tax deduction. By supporting an organization or cause, you may be able to lessen your tax bill. As you plan your giving, remember it’s important to keep accurate records in the event that you need to substantiate such gifts. Receipts for your charitable donations can confirm your charitable contributions should the Internal Revenue Service (IRS) require documentation.
If you make a donation to a charity of cash or property, you need to obtain a bank record or written acknowledgment from the recipient charity that specifies the amount and date of contribution, as well as the name of the charity. A canceled check for a donation of cash no longer suffices as a receipt in the eyes of the IRS. For property, the acknowledgment must describe the gift and indicate an estimated valuation; it is important to note that donations of clothing and household items must be in “good condition” in order to qualify for a tax deduction. Bear in mind that non-cash contributions exceeding $5,000 require a qualified, written appraisal within 60 days of the date of gift, and you must submit the appraisal when filing your taxes.
In addition, the donation statement from the recipient charity must specify whether any considerations (e.g., meals, clothing, concert tickets, trips, or books) were given in exchange for the contribution (honoring contributors with a symbolic gift of appreciation is a common practice, especially with fund-raising on television). Your tax deduction is reduced by the amount of the consideration.
While receipts and other acknowledgments are not filed with your annual federal income tax return (Form 1040), these should be carefully stored with other tax documents for the year in which the donations were made. As a general rule of thumb, you should hold onto tax records for at least six years. These records include all tax forms, investment statements, bank statements, proof of deductions, or any receipts associated with a particular return. Being prepared and staying organized can help ensure you have the records you need, when you need them.
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Year End Tax Planning
Please call to schedule an appointment this fall so we can ensure that you are taking advantage of all tax savings for 2011. We must act now before the year ends.
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Lesley will be speaking at the following seminars: IRS Form 1099 Reporting: What You Need to Know, October 20, 2011 Holiday Inn & Suites Convention Center, 10920 Nall Avenue, Overland Park, KS Register online: http://www.lorman.com or Call: 866-352-9539 Use: Discount code: F2716129 Priority code: 15999 to receive a 20% discount.
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