Donation Statement

[Cathy]

Client gave donations to his church, several of which were over $250. On the year-end statement,

the church listed dates and amounts.

Then the following:

Total Tax Deductible Amount: $5,000.00

Total Non Tax Deductible Amount: 0

Total Offering: $5,000.00

Am I correct in assuming that this will NOT satisfy IRS's Regulations?

[Margaret CPA in OH]

Does it have the disclaimer about 'no goods or services were provided' language or similar? Our statements list the dates and amounts and totals for each fund at the bottom. To my knowledge, however, there has never been a "Total Non Tax Deductible Amount" listing. I wonder how/why they keep track of that.

[Terry D EA]

The church statement needs to have the disclaimer language as Margaret has pointed out.

[Jack from Ohio]

Must be on a letterhead style paper with church name, address etc. Each letter must have the disclaimer. Each letter must be dated. Each letter must be signed by an officer of the church with financial authority.

The only number that must be on the letter is the total taxable donations. Anything else is for convenience.

Most church treasurer's have no clue about the rules and regulations, and most do not want to bother to learn the right way.

If audited, if the statement does not contain all the appropriate information, and is not given to the taxpayer BEFORE his tax return is filed, it will be disallowed. Recent tax court cases have set the rules and precedent.

[JohnH]

I agree with most of the points made, but a few clarification are in order. The contribution receipt does not have to be on letterhead style paper- any contribution statement layout which clearly identifies the charity is acceptable. There is no requirement that the acknowledgement be signed by anyone. The critical elements are that it must have the boilerplate wording and it must be in hand before the tax return is filed.

It is also important to remember that these rules apply to any single contribution over $250. For single contributions under $250 (even if the total given to the charitable organization is well over $250) the canceled check is sufficient proof. For example, if a taxpayer gave $249 per week by check, he is entitled to a $12,948 contribution deduction even if there is no acknowledgement letter provided at all (although I wouldn't recommend that a church follow this as a routine practice).

Here is a concise explanation of the potential damage from a trusted source. It won't matter to a church treasurer or administrator who is clueless about these things (as Jack has correctly pointed out), but for one who has any knowledge of the issues, the ECFA is well-respected.

http://www.ecfa.org/Content/Charitable-Contribution-Denied

Publication 1771 is also helpful, although it chases so many rabbits that it really should be split into two separate publications in order to address the separate matters of undesignated contributions and contributions involving some sort of quid pro quo.

http://www.irs.gov/pub/irs-pdf/p1771.pdf

[Cathy]

Thanks everyone! Your replies are my feelings as well. It seems we have a treasurer who has taken the approach that

he/she will do it her/his way....which is not what the very detailed IRS Regulations state. And my feelings, exactly,

Jack, as who is to say the writer knows what the Regulations state, much less how to state it properly on the donation

statements. This is the same church that I sent detailed information to last year in an effort to protect my client as well as their other members. Evidently someone didn't appreciate my time and effort. One more time....and if the church still refuses to write a proper statement, then I'll just have to tell my client we'll have to overlook his contributions in excess of $250 for his single donations.

JohnH,

Thanks for the ECFA article! Hopefully, it will get someone's attention and will encourage them to review all of the information I'll send.

Thanks, everyone!

Take care,

Cathy

[JohnH]

It's beyond my comprehension as to why a church treasurer would ignore this information once it is brought to his/her attention. That;s downright silly. But if that's the situation you're encountering, then there is some advice you could give the client. I'd never suggest that they dial back their giving, because a truly motivated giver has reasons to give other than the tax deduction. But he can protect himself by breaking up his contributions into amounts less than $250. If he wanted to give $450 in a single gift, there's nothing wrong with writing two or more separate checks which add up to the $450, provided neither check exceeds $250. I'd probably date them on separate days, but beyond that I don't think he has a problem, no matter how much he gives in total.

[MAMalody]

Great advice JohnH. One clarification:

<< If he wanted to give $450 in a single gift, there's nothing wrong with writing two or more separate checks which add up to the $450, provided neither check exceeds $250. I'd probably date them on separate days>>

The word you are looking for is "must" date them on different days. If you give two checks on the same day to the same church- say one at the AM service and one at the PM service, and the total is $250 or more the $250 rules apply even though they are separate checks..

[JohnH]

Thanks Mike.

I didn't know that.

Always good to learn something new from you, since I know it's reliable.

[MAMalody]

Now that I am reliable, my answer is probably wrong:>)