Fluent in Practice Management

As we approach the end of the year it’s common for taxpayers to start looking at making charitable donations to minimize their tax bill. Depending on the size of the donation there are certain requirements the IRS has for documentation, such as:

1. Taxpayers who make single donations of $250 or more to a charity must have one of the following:
   • A separate acknowledgment from the organization for each donation of $250 or more.
   • One acknowledgment from the organization listing the amount and date of each contribution of $250 or more.
2. The $250 threshold doesn’t mean a taxpayer adds up separate contributions of less than $250 throughout the year.
   • For example, if someone gave a $25 offering to their church each week, they don’t need an acknowledgement from the church, even though their contributions for the year are more than $250.
3. Contributions made by payroll deduction are treated as separate contributions for each pay period.
4. If a taxpayer makes a payment that is partly for goods and services, their deductible contribution is the amount of the payment that is more than the value of those goods and services.
5. A taxpayer must get the acknowledgement on or before the earlier of these two dates:
   • The date they file their return for the year in which they make the contribution.
   • The due date, including extensions, for filing the return.
6. If the acknowledgment doesn’t show the date of the contribution, the taxpayers must also have a bank record or receipt that does show the date.

When making donations it’s important to check that the organization you are donating to qualifies as a 501(c)(3) organization. The IRS provides a lookup tool which can be used to check on the status of any organization you have questions about.

Lastly, when making large or complex donations it’s good to engage your accountant early to ensure that proper planning and documentation give you the maximum benefit from your charitable contributions.

IRS Exempt Organization lookup:

https://www.irs.gov/charities-non-profits/exempt-organizations-select-check