Last week, a couple was denied their $18.5 million deduction due to a paperwork technicality, this week there was another case of a taxpayer losing their deduction based on a paperwork problem.
A $25,000 charitable contribution deduction was rejected because the donee organization failed to document whether the donor received any ‘perks’ as a result of the donation.
Why Does This Need To Be Documented?
This needs to be documented because you may only deduct the donation less any perks received. Here are a few examples:
- You donate $200 to your favorite charity and, as a thank you, they give you two tickets to an MSU football game. The tickets have a fair market value of $100. You may only deduct $100 because of the ‘perk’ you received.
- Concert tickets go on sale with all proceeds supporting your favorite charity, so you buy them for $50. The concert tickets have a fair market value of $14. You may only deduct $36.
- You buy tickets to a benefit dinner for $500. The fair market value of the dinner and drinks you receive is $100. You may only deduct $400.
- At a silent auction you bid $5000 on and win a flat screen TV. The fair market value of the TV is $1000, so you may only deduct $4000.
What if I received documentation from the organization I donated to, but they failed to document all the required information?
Contact the organization as soon as possible to receive proper documentation! The IRS has been cracking down on compliance with charitable contribution deductions, so you will want to make sure to keep your paperwork organized and ready for next tax season.
Further Reading + Useful Links
This Tax Season is Almost Over, But Stay Organized for Next!
In the News: Couple Loses $18.5 Million Deduction on Technicality
IRS Publication 561, Determining the Value of Donated Property
IRS Publication 526 (2012) Charitable Contributions
Form 8283, Noncash Charitable Contributions