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Charitable Documentation

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:

  1. 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.
  2. The acknowledgement must indicate the amount paid by the taxpayer. (Pretty much of a "no-brainer" on this one.)
  3. 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.