We've all done it. We're all guilty. Yes, even I have deducted a charitable contribution for which I did not have "proper" documentation. (Just kidding. Tax professionals don't do that kind of stuff.) Before passing judgment though, let's review the IRS rules.
For a charitable contribution to be deductible, the IRS Code requires that a monetary contribution of $250 or more must be substantiated by ALL of the following:
- A contemporaneous written acknowledgement. This means it must be obtained before the due date of the tax return (including extensions) or the date the return is filed, whichever comes first.
- The acknowledgement must indicate the amount paid by the taxpayer. (Pretty much of a "no-brainer" on this one.)
- The acknowledgement must indicate whether the organization provided any goods or services in exchange for the contribution. And if so, a good faith estimate of such goods and services must be supplied. (Think bull roast ticket or any contribution involving a meal.)
Again, the receipt must contain all three of these elements, or you run the risk that your charitable deduction will be denied by the IRS under audit. In a recent court case, the United States Tax Court disallowed a deduction because a church forgot to include part 3 in their letter to taxpayers, even though they did include parts 1 and 2! We recommend that you check all your charitable receipts, particularly the large ones, to make sure that they contain the required language.