Required wording on donations statement

[Janitor Bob]

Am I correct that the statement from client's church that shows their donations for the year must include wording to the effect that no goods or services were received in exchange for these donations?

$5,500.00 donations, but this is the first time I have seen a statement that did NOT have that wording.....Wondering if I should advise client to obtain a new statement from church.

[Jack from Ohio]

Am I correct that the statement from client's church that shows their donations for the year must include wording to the effect that no goods or services were received in exchange for these donations?

$5,500.00 donations, but this is the first time I have seen a statement that did NOT have that wording.....Wondering if I should advise client to obtain a new statement from church.

YES! Immediately BEFORE you file the return. If audited, it WILL be disallowed. Recent court case supported the IRS in this matter.

[BulldogTom]

I am with Jack on this one. The church may not know the rules as a lot of the bookkeepers and treasurers are volunteers. The receipt must have the wording if the donation is in excess of $250.

You said donations, indicating multiple giving events. If none of the amounts were in excess of $250, and the taxpayer has the cancelled checks, they will be all right.

But if there are amounts over $250, the taxpayer must have a receipt in their possession at the time of the filing of the return. If they don't have a proper receipt, no deduction.

Tom

Hollister, CA

[kcjenkins]

Am I correct that the statement from client's church that shows their donations for the year must include wording to the effect that no goods or services were received in exchange for these donations?

$5,500.00 donations, but this is the first time I have seen a statement that did NOT have that wording.....Wondering if I should advise client to obtain a new statement from church.

OMG YES! I'd contact the pastor, too, and explain the importance of re-sending EVERYONE a new letter containing the required wording. It is not optional.

[Janitor Bob]

Thanks everyone....That is what I thought....many of the donations were in excess of $250.00...so no relief there. I will direct the client as such.

[Jack from Ohio]

Note: No goods or services, other than intangible religious benefits, were given to the donor in exchange for the contributions listed above.

[Kea]

The receipt is not required to disclose that the organization is a 501 c 3, right? I checked Pub 1771 and didn't see that listed. (just making sure.)

[Jack from Ohio]

The receipt is not required to disclose that the organization is a 501 c 3, right? I checked Pub 1771 and didn't see that listed. (just making sure.)

Churches, by their very design, are 501( c)3 organizations. No requirement for that to be on the giving statements.

[Kea]

Thanks. Some state it, some don't. Just good to have certainty.

(Oh well, guess that means I'm in the wrong business.)

[Richcpaman]

Thanks. Some state it, some don't. Just good to have certainty.

(Oh well, guess that means I'm in the wrong business.)

Doesn't mean your in the wrong business, a church does not have to be a 501©3 It is covered by the first amendment. But, if the church wants to do some other things, then they usually set up a 501©3 to do those things... Soup Kitchen, etc.

Rich

[Mr. Pencil]

Thanks. Some state it, some don't. Just good to have certainty.

I've seen some that state they are NOT tax deductible! But certainty is elusive because many are misleading--donations to AARP Foundation are tax deductible, while donations to AARP itself are non-deductible political contributions, You can check Pub 78 for qualified organizations, although you won't always find one that is a local affiliate of a national organization.

[jklcpa]

You may also be able to check for the type of organization directly on their website.

[kcjenkins]

Thanks. Some state it, some don't. Just good to have certainty.

Probably those that don't include it don't simply because they are unaware of the need for it. Often the letters are done by whoever does the church correspondence, who may be a volunteer, the Pastor or his wife, etc, in smaller churches. Even in large churches with paid employees, they often just assume that since churches are exempt, any contribution to them is deductible. Heck, in the old days, so did IRS agents. Nearly 20 years ago, however, Congress put tough rules into the tax code that require donors to have specific receipts for most charitable contributions.

In the Durden Tax Court case, a $22,500 church contribution was disallowed because the receipt did not contain a no-goods-or-services statement.

The Rules

Under U.S. Tax Code Sec. 170, a taxpayer is allowed a charitable contribution deduction for a contribution or gift to or for the use of an organization organized and operated exclusively for charitable or educational purposes. Under Code Sec. 170(f)(8)(A), no charitable contribution deduction for any contribution of $250 or more is allowed unless the taxpayer substantiates the contribution with a contemporaneous written acknowledgment of the contribution by the donee organization that meets certain specified requirements. Under Code Sec. 170(f)(8)(B ), the donee organization must state in the acknowledgment whether the donee organization provided any goods or services in consideration, in whole or part, for the contributed property or cash. If so, the acknowledgment generally must include a description and good faith estimate of the value of any goods or services provided. (Reg. § 1.170A-13(f)(2)) Under Code Sec. 170(f)(8)©, a written acknowledgment is contemporaneous if it’s obtained by the taxpayer on or before the earlier of: (1) the date the taxpayer files the original return for the tax year of the contribution; or (2) the due date (including extensions) for filing the original return for the year. (Reg. § 1.170A-13(f)(3))

Even tho when challenged, they got a second letter that did include the statement, the Court ignored that letter as not being contemporaneous.

[Cathy]

Am I correct that the statement from client's church that shows their donations for the year must include wording to the effect that no goods or services were received in exchange for these donations?

$5,500.00 donations, but this is the first time I have seen a statement that did NOT have that wording.....Wondering if I should advise client to obtain a new statement from church.

JB,

Although stated above, just wanted to clarify and note the importance of the taxpayer obtaining the statement from the charitable organization (churches included) PRIOR TO FILING HIS/HER TAX RETURN or ON OR BEFORE THE TAX RETURN DUE DATE (4-15-14 for 2013 returns), WHICHEVER DATE IS EARLIER.

In one court case, the taxpayer was able to get the necessary statement he needed specifically for his audit....HOWEVER, the audit took place, of course, after the due date of filing his original return. As the church dated the statement (for his audit) on the date they prepared it, the statement wasn't allowed for the purposes of his audit, thus the taxpayer had to pay the income taxes on the donation(s) to the church as a result of his audit.

I feel the court case took everyone by surprise....a hard lesson for the taxpayer, but a very beneficial lesson for tax professionals as prior to the court case, I wouldn't have been concerned that the taxpayer obtained the statement a couple of years later for his audit...especially from a church. Just another example of why the code needs to be overhauled! Common sense is nowhere to be found in the code any longer.

Take care,

Cathy

[Catherine]

I have even run into a couple of smaller churches where the volunteer secretary did not know to send ANY letters, EVER. How do I know so much about the secretary? Because *she* was the one who came to me for tax help (with her own list of donations to the church for the year)! She immediately went back through her records and sent the letters to everyone.

[BulldogTom]

Personal tax return just had this same issue. We gave a donation over $250 to a local church to help with their Vacation Bilble School. We have no children who attended the VBS, just knew that they were short on funds. We asked the pastor if VBS was budgeted and if we could designate our giving to that cause in the church. Yes, it was a line item in the budget and he was thrilled to get the help for the porgram. Fast forward to Jan 31st. Giving statement comes in from the church and shows the amount as non-deductible. We called up the administrator and he was adament that any designated gift was not deductible. My wife threw a stink. It did help when she indicated that she had been doing taxes for 14 years and that her husband (me) had set up and processed donation reciepts for churches in the past and that if they wanted to meet with me and review the rules, I would be happy to do so. They reviewed the issue and resent the reciept showing it as deductible.

Just a lack of knowledge for a complicated tax code.

Tom

Hollister, CA