The IRS is staffing up to audit the billionaires in the American middle class. In my opinion, they will be hiring specialists to go after low-hanging fruit where the IRS knows compliance is lax. Charitable Contributions are an easy audit item for the IRS’ newly hired examiners. The rules are simple. The audit can be done through the mail. That makes for efficiency; efficiency results in volume.
A donor cannot claim a tax deduction for any single contribution of $250 or more unless the donor obtains a contemporaneous, written acknowledgment of the contribution from the recipient organization. Without a written acknowledgment, the donor cannot claim the tax deduction. The donor must obtain a timely, written statement containing:
- The name of the organization
- The amount of cash contribution or, a description (but not the value) of non-cash contribution
- A statement that no goods or services were provided by the organization in return for the contribution (if that was the case);
- In the case of a religious organization, a statement that goods or services, if any, that an organization provided in return for the contribution consisted entirely of intangible religious benefits (ceremony and community), if that was the case
- A description and good faith estimate of the value of goods or services if any, that an organization provided in return for the contribution if any
These requirements have been around for decades. However, in 2022, we are still seeing lots of donation acknowledgments that do not contain items 3, 4, and 5. These acknowledgments lacking basic requirements are coming from large national and local nonprofit organizations. Inexcusable.
If you are audited and don’t have the required items in your receipt, the IRS will deny the deduction. You cannot retroactively get the receipt with the required items after the IRS contacts you (legally you cannot get the receipts after you file the tax return).
What you should do:
1. Review each acknowledgment and make sure it contains 1, 2, and either 3 or 4.
2. If the acknowledgment does not contain the above, contact the organization and require it from them.
3. For any organization that does not provide the above information, consider donating somewhere else next time. If they are not careful with your acknowledgment, they’re also probably not careful with the money you donated.