Tax Strategies & Credits

Tax Planning Tips for Holiday Charity Giving

Tax Planning Tips for Holiday Charity Giving

As the fall and winter holidays approach, Americans’ thoughts turn to giving thanks for all that they have. That contemplation often leads to people making contributions to their favorite charities, and in response those charities more actively engage in soliciting donations.  Unfortunately, when people are in a more giving mood, that’s also when scammers start coming out of the woodwork, hoping to fool busy and distracted charity-minded folks into giving to them instead of to legitimate organizations.  It’s important that you know what to look out for to protect you from making this mistake, and it is equally important that you have the proof you need to satisfy the Internal Revenue Service’s documentation requirements for charitable contributions. We are happy to provide you with some helpful hints that will make sure that your holiday contributions accomplish everything that you want them to.

Documenting Your Charitable Contributions 

People who take the standard deductions don’t need to keep records of their charitable contributions, but if you itemize your deductions and make a contribution to a charity, you need to be able to prove it. This true whether your contribution is a monetary donation of a check, paid by a credit card or in cash, or a donation of property such as a car or toys. Each type of contribution requires a different type of proof to back it up.

In order for a taxpayer to deduct a monetary donation, they need to have either a cancelled check, a receipt, a bank statement or a confirmation in writing of the contribution from the charity itself. In either case, the documentation should include the date that the contribution was made, how much was given, and the name of the charity itself. For contributions that are $250 or more, a letter or receipt from the charity is specifically required. It is important to note that the common practice of contributing cash to a charity kettle or similar undocumented contribution cannot be itemized as a charitable deduction.

In order for a taxpayer to deduct a noncash donation — including items like food for charity food drives, toys for children’s charities, and used clothing — it is necessary to determine what the fair market value of the item was when the contribution was made. Taxpayers also need to keep a list of all of the specific items that were donated, the charity to which it was given and what the value was. As is true with monetary donations, contributions that are valued at $250 or more also require written acknowledgement from the charity itself, which can be in the form of either a letter or a receipt. Noncash contributions that are valued at $500 or more require even more documentation, so if you plan on giving a charity a donation of this type, please seek guidance from our office.

How to Spot a Charity Scam

Many people who want to contribute to a favorite charity get tricked by scammers who purposefully identify themselves with names that are similar to those of legitimate organizations. Whether you are being approached for a donation or are doing a search for yourself, you want to make sure that your contribution is going where you intend it to. Double check the name of the charity by searching for it on the IRS.gov website, which has a page dedicated specifically to Exempt Organizations

How to Avoid a Disaster Relief Scam 

One of the most recent scams that people are falling prey to has relied on people’s natural tendency to want to help those who have been victims of natural disasters: scammers are setting up false charities that promise to pass on contributions to disaster victims, and instead keep the donations for themselves.  Scam artists engaging in this type of fraud will actually reach out directly to unsuspecting individuals via email or phone, going so far as to set up solicitation pages on the internet to which they direct well-intentioned victims. Taxpayers who want to make contributions to disaster relief efforts are cautioned to do so through well-established organizations with which they are already familiar.

How to Avoid Identity Theft

Identity theft is an increasingly common issue, and has even invaded the area of charitable giving. Remember that there is no reason for a charity to need either your Social Security number or your password to any bank account or credit card account in order to accept a donation. It is also important to be extremely cautious with any payments that you make to an organization with which you are not fully familiar – and particularly with giving out your credit card number.

Giving to charities is not only a good thing to do, it can also offer a tax benefit – but only if the contribution is both legitimate and properly documented. Make sure that you are protecting yourself before handing over your hard-earned money or your personal information.

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Karen C. Drescher, CPA, CGMA

Karen C. Drescher, CPA, CGMA

Whether it is helping a individual or a Georgia small business with their taxes, or offering to be a backstop through their difficulties, Karen is always there for her clients. When you are a client of Karen's, she always tries to make you feel comfortable in a casual and friendly environment.

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