In the media, the holiday season has become more associated with buying than giving or receiving. Black Friday starts earlier every year, with plenty of press coverage documenting each successive jumpstart.
Yet for many people, giving remains at the core of the “reason for the season.” This is true both for people involved in religious traditions and those whose charitable giving is to secular organizations.
As you go about your charitable giving, however, make sure you follow the formalities recommended by the IRS. You certainly don’t wait to face an audit or some sort of tax charge in the New Year just because you didn’t dot all the I’s and cross all the T’s in making gifts to charity.
The first tip for avoiding problems, straight from the IRS itself, is to know the tax status of the organization you’re thinking of giving to. Not all charities are qualified charities in the eyes of the IRS. If you plan to take a charitable deduction, make sure the recipient of your gift is recognized by the IRS as a qualified charity.
Once you’ve clarified the status of an organization, make sure you keep good records of your donations. For cash contributions, this could take the form of a cancelled check or a bank statement. You could also request a written statement from the charity to document what you’ve given.
If you are giving property rather cash, or in addition to cash, be aware of the amount you can deduct for the property. That amount, under IRS guidelines, is the fair market value.
Source: “IRS Offers Tax Tips for ‘The Season of Giving’,” IRS.gov
Our firm handles situations similar to those discussed in this post. To learn more about our practice, please visit our IRS tax controversy page.