Don't Expect the IRS to Take Your Word on Charitable Deductions – Substantiate


by Cindy Toran, Tax Manager

What do we have to say about charitable deductions? Three words, SUBSTANTIATE, SUBSTANTIATE, SUBSTANTIATE!

“Honestly, I attend church every week (religiously) and give $20 cash when the offering plate is passed. So $20 times 52 weeks = $1040 charitable deduction.”  Really?  Not trying to cast any stones here; you have never missed a week of church while on vacation?DSCN1774-300x225

The IRS will disallow such a deduction.  For cash donations the taxpayer must have either:

  1. Bank records (e.g., cancelled check or account statement) OR
  2. Written acknowledgment from the charity documenting the contribution amounts and dates received.

Obviously, for relatively small individual donations using a check may be preferable.

But it gets even more complicated…..

How about single donations of $250 or more?  These must have written acknowledgment from the donee (organization receiving the gift). The gift must:

  1. Be received by either the date the tax return is filed or the extended due date, whichever is earlier. AND
  2. State whether any goods or services were provided in consideration for the contributions; and, if so, an estimate of their FMV.

What if I have payroll deduction contributions?

Substantiation would consist of and require a:

  1. Form W-2 or other employer document AND
  2. Pledge card or other document prepared by the charity.

What about all those household goods and used clothing (i.e., non-cash) items donated?

If <$250 value for each donation, you need a

  1. Receipt unless impractical to obtain (e.g., left at a drop box) AND
  2. Reasonably detailed description of item(s) donated, FMV, method of valuation, date and name of donee.

If the donated item is:

  • >$249, you also must have an acknowledgment from the organization.
  • $250-$500, acquisition cost, approximate date, and how acquired are additional requirements.
  • >$5K, a written appraisal is also required.

Autos, Boats & Planes

Autos, boats and planes are the same as other non-cash donations; and, if the value is at least $250, Form 1098-C from the organization must be obtained.

Volunteer Out-of-Pocket ExpensesAnne-Frank-Quote-circle-300x225

For volunteer out-of-pocket expenses receipts, cancelled checks or other written records are required.  If the amount is >$249 considered separately (e.g., $250 airline ticket), an acknowledgement also mandatory.
Nonetheless, after all this information you may want to note …

For more information, call Alex Franch at 781.789.7200. WorthTax has locations in Norwell, Dedham, and Weymouth, Massachussetts.
Alex Franch

Mr. Franch is a Tax Specialist and Partner at Joseph Cahill & Associates / WorthTax. He has a diverse background including a Bachelor of Science from Boston College in Mathematics and extensive military service. Mr. Franch is an Enrolled Agent and has eight years of tax preparation experience. He has been serving individuals, families, and businesses for several years with tax and financial planning strategies and is a junior partner with the firm. Mr. Franch is licensed by the Financial Industry Regulatory Authority (FINRA) with a Series 6, 63, 65, and 7, and by the Commonwealth of Massachusetts Division of Insurance.