Most Americans don't keep very good financial records for tax time. However, one thing most individuals try to keep track of is their tax deductible charitable receipts. Generally, this is not a problem for the conservative giving that most Americans do, but for people that give a substantial amount throughout the year, keeping donation receipts can be detrimental to their tax filing. After years of asking taxpayers to prove their charitable deductions through receipts, the IRS is now looking at other ways to substantiate donations.
According to a recent article in Bloomberg BNA, the IRS is considering enacting a provision to their charitable donations requirement. This provision will allow recipients to substantiate gift amounts for their donors.
Since 1994, the IRS has made it the responsibility of the donor to keep contribution receipts for donations over $250. For many ill-prepared taxpayers the IRS's requirement to substantiate donations with a receipt has led to numerous audits and IRS disputes. Some taxpayers have argued that a charities' 990 form should be allowed to substantiate donations. The IRS wishes to stop that practice and make a new provision that is optional for charities.
Under the new rule, if enacted, a charity will be given an optional 'donee report' to file with the IRS that may be used to substantiate a donors gift. The IRS will require that recipients who chose to file the donee report provide donors with reported information specific to their donation. This new report will help the IRS and taxpayers keep a better record of charitable contributions and may limit the number of IRS disputes against taxpayers.
If you are an instrumental part of a charitable organization, chances are you are aware of how important it is for you and your donors to keep appropriate tax records and adhere to federal tax law. This is especially true for contributions received through an individual's estate, which can sometimes be disputed. When an estate generated donation is in dispute, an attorney may be able to help your charitable organization effectively resolve the issue.
Source: Bloomberg BNA, "IRS Proposes New Rules for Substantiating Charitable Contribution Deductions: What Every Charity Needs to Know," J. J. Harwayne Leitner, Esq., LaVerne Woods, Esq., and Coleen M. McGrath, Esq., Nov. 10, 2015