Charity Begins At Home

If you are one of those generous souls who makes significant charitable contributions each year, be sure you document contributions the right way or be prepared for a possible losing duel with the IRS over the tax deductibility of your contribution over $250. All contributions that exceed this amount are only deductible if you have a receipt from the charity which either states that “NO GOODS OR SERVICES” were received in exchange for the contribution, or if some goods or services were received, it contains a description of the goods/services and a good faith estimate of their value so you know the deductible amount.This receipt requirement does not apply to individual donations of $250 or less even if the total given to a charity exceeds $250. If the gift is other than money, such as a vehicle, then special receipt and reporting rules apply. The receipt is not filed with your tax return but if you get audited you must show the receipt to keep the deduction. The receipt must be in your possession when the return is filed. You cannot go back and fix the issue later, according to the Tax Court. It could involve a lot of money. The takeaway from this is to check your records at home before you send them to your tax preparer to be sure you have the right documentation. Otherwise you may invoke the old saw that “No good deed goes unpunished.”