The IRS requires that adequate records be kept by the taxpayer to substantiate the deduction for charitable contributions. The type of records depends on the amount and type of contribution.
Cash contributions are those made by cash, check, credit card, or payroll deduction. In addition, out-of-pocket expenses incurred when donating services are included. The records required for cash contributions depend on the amount of the contribution.
CAUTION: For tax years beginning after August 17, 2006, no deduction is allowed for any contribution of cash, check, or other monetary gift unless the taxpayer maintains the following as a record of the contribution:
(1) a bank record; or
(2) a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution.
This recordkeeping requirement applies regardless of the amount of the contribution and it not satisfied by any other type of written records. The IRS has provided special guidelines for taxpayers who make contributions through payroll deductions.
Code Section 170(f)(17); Notice 2006-110, 2006-51 I.R.B.
For contributions less than $250, one of the following three types of documentation must be kept.
(1) Either a cancelled check, or an account statement that can be clearly read, that shows:
(i) the check number, amount, date posted, and name of the recipient (for a contribution by check),
(ii) the amount, date posted, and to whom paid (for a contributon by electronic funds), or
(iii) the amount, transaction date, and to whom paid (for contributions made by credit card).
(2) A receipt or written communication from the charitable organization showing the name of the organization and the date and amount of the contribution.
(3) Other reliable written records that show the name of the charity and the date and amount of the contribution. Reliable records include written information made by the taxpayer at the time of contribution or small token or buttons received for small cash contributions.
Reg. Section 1.170A-13
For cash contributions of $250 or more, an acknowledgement of the contribution from each qualified organization or certain payroll deduction records are required to substantiate the deduction. If more than one contribution of $250 or greater is made to the same qualified organization, then either a separate acknowledgement of each contribution or an acknowledgement of the total contribution is required.
The acknowledgement must meet the following tests:
(1) It must be written.
(2) It must include:
(i) the amount of cash contributed;
(ii) whether any goods or services other than token items or membership benefits were given in return; and
(iii) if any goods or services were received, a description and estimate of value of these goods and services.
OBSERVATION: If a religious intangible benefit was received, such as admission to a ceremony, then the acknowledgement must list this item, but is not required to estimate a value.
(3) It must be received by the earlier of:
(i) the date the return is filed for the year in which the contribution is claimed; or
(ii) the due date, including extensions, for filing the return.
Contributions that are made through payroll deductions do not need an acknowledgement; however, if $250 or more was deducted from a single paycheck, the taxpayer must keep:
(1) a pay stub, W-2 Form or other documentation from the employer verifying the amount withheld; and
(2) a pledge card or other documentation from the qualified organization that indicates that goods or services are not provided in return for the contribution.
Acknowledgement for unreimbursed out-of-pocket expenses can be satisfied by:
(1) adequate records proving the amount of expenses; and
(2) by the required date, an acknowledgement is provided by the qualifying organization that contains:
(i) a description of the services provided;
(ii) a statement indicating whether any goods or services were provided in exchange for the expenses incurred, if any;
(iii) an estimate of the value of the goods or services provided as reimbursement (except intangible religious benefits); and
(iv) a statement of any intangible religious benefit provided
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Norman M. Fleischer, CPA, LLC
Your "Caring Professional Advisor"
26-07 Broadway, Suite 14,
Phone: (201) 794-1119
Fax: (201) 794-0079