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News Archive: New Rules for Charitable Contributions
 For Immediate Release:
November 01, 2007
By Kelly Creed
RINA Accountancy Corp.
U.S. income tax returns filers who itemized deductions make more than 160 billion dollars of charitable gifts annually, while reducing their income tax by 50 billion dollars. The IRS has seen a significant rise in misrepresentation, abuse and fraud in connection with charitable deductions claimed by taxpayers. As a result, the 2006 pension Act is placing stricter guidlines on substantatiation the donor must obtain, in order to take a charitable deduction. These changes are in effect for donations made in 2007.
Cash contributions of less than $250 must be substantiated by either: 1. a cancelled check, 2. bank record or 3. receipt from the charity showing the donor's name, contribution date, and contribution amount. Other written records such as a diary or log will no longer meet the substantiation requirements. For cash contibutions over $250, the donor must have a written acknowledgement from the charity with the above information including a statement that the donor did not receive any goods or services as part of the donation.
Tax law now requires that any non-cash contributions of property donated must be of qaulity anf of "good" condition. For non-cash contributions under $250, the donor is required to have written substantiation reflecting: 1. the donor's name, 2. date and location of contribution, and 3. description of property (i.e. 10 shirts, 2 sweaters, etc.) The receipt is not required to reflect the property's fair market value. In the case of non cash donations over $250, the donor must obtain the documentation as listed above and also document the fair market value of the donation. It will no longer be acceptable to report a donation of "3 boxes and 4 bags of household items." The taxpayer should consider taking a picture of the goods they contributing.
For non-cash donations of more than $5,000, the taxpayer must obtain the following documentation: 1. a written appraisal completed by a qualified appraiser 2. both the appraiser and the donee organization must sign Form 8283.
Taxpayers who fail to obtain documentation substantiating their charitable contributions face the prospect of the IRS denying the deduction for the donation, thereby losing the tax savings from their donation. Additionally, taxpayers who deduct amounts not properly substantiated or valued may be subject to valuation penalties.
Kelly Creed joined RINA in January 2003 after completing her bachelor of Science Degree in Accounting at Cal Poly San Luis Obispo. She received her CPA license in 2005. Currently she is working on her Master of Taxation at GGU. She has four years experience working with closely held businesses and their owners, with an emphasis in retail, franchising, and real estate. She frequently gives presentations to the Small Business Administration and Women's Self Employment Initiative regarding business tax issues. At RINA we want you to be aware of changed in tax laws and we are in a postion to provide any necessary guidance. If you have any questions regarding charitable contribution, please contact a RINA representative at 925-210-2180 or visit www.rina.com
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