Taxpayers who itemize deductions are required to keep records to substantiate any charitable gifts that are claimed as deductions for tax purposes. The type of record or acknowledgment depends on the nature of the gift involved.
A cancelled check or other records that the donor keeps will generally serve to substantiate small contributions. The threshold for organizational reporting begins with gifts of $75 or more. Generally the charity must provide the donor with a written statement confirming whether or not any goods or services were received and the value of the benefits given in exchange for the gift. (Note certain minor items of minimal value such as inexpensive premiums do not have to be reported.)
Get it in writing
Individual gifts of $250 or more require a written acknowledgment of the contributions from the charity. A cancelled check or independent donor records will not suffice. The written acknowledgment must include:
- the amount of the gift
- the value of any goods and services received, if any, other than certain token items or membership benefits
- timely receipt on or before the earlier of the date the return is filed or the return due date, including extensions.
In addition to any required written acknowledgments, non-cash gifts over $500 must be reported on IRS Form 8283 by the donor. If the non-cash contributions total less than $5,000, only Side A of this form must be completed. For non-cash gifts over $5,000, other than publicly traded securities or non-publicly traded securities valued at less than $10,000, the donor must obtain a qualified written appraisal and complete Side B of Form 8283, which includes a summary of the appraisal. In these circumstances, an authority or representative of the charity must sign the form as well.
Anticipate donors’ needs
Since many donors may have lost or misplaced the legally required records or acknowledgments, it may make sense for nonprofits to institute a specific gift acknowledgment program for larger cash and non-cash contributors. During the early months of the year,consider a special acknowledgment mailing to these top donors that would include the required written information, thank them again for their gifts, and remind them to keep this acknowledgment for tax purposes. The carrier envelope might include a teaser such as “Required tax information inside.” The package might also be designed to encourage future gifts by including publications such as a helpful giving guide or thank-you brochure such as the popular Sharpe publication entitled “Thanks for Giving.” (Click here for more information on fitting acknowledgment publications).
Superior donor service can help to cement relationships with your most generous contributors. While the duty to substantiate larger gifts lies primarily with the donor, assistance in this complex area of the tax law will be appreciated by donors and their advisors.