Charitable donations can provide a method to lower one’s tax obligations while also bettering the community. It is wise for those who reap these rewards to keep records of the donation to support the deduction in the event of an audit.
Questioned by the IRS? These documents will help support your charitable donations. The types of documents needed will vary depending on the type of donation given. Here are three common examples:
- Cash gifts. The Internal Revenue Service (IRS) requires a bank record, payroll deduction records or a written communication from the organization. When the gift is over $250, the IRS requires clear language within the written communication as to whether or not goods or services were provided in exchange for the donation. If over $500, completion of IRS Form 8283 is required.
- Donation of goods. If the donation is over $5,000, the agency requires completion of Section B of Form 8283 which generally includes completion of an appraisal. For smaller donations an estimation of fair market value and a form acknowledging the donation from the organization will generally suffice. The donation of vehicles is a bit more complicated and special rules apply.
- Mileage. The cost of gas, tolls and parking fees can be deducted. Keep a mileage log and include documentation of these costs.
A recent piece in Kiplinger highlights how “unforgiving” the IRS is with these donations. Fail to have the right paperwork and the agency is unlikely to allow the deduction. This type of review is often part of an audit. As such, it will likely impact those who are contacted by the agency and notified of an impending review.