Taxation: Verify Contributions

VERIFY CHARITABLE DONATIONS

 

Sometimes we are called upon to verify non-cash contributions we deducted on our tax returns under an audit, - but we don't have any actual proof. A written summary is not proof. The IRS may accept your contemporaneous notes, but they don't have to. They are much more likely not to if it is an especially large deduction. Better not to completely rely on your legitimate, but not necessarily IRS acceptable charitable deduction notations. To solidify the deduction, especially if it is large, it is a good idea to get a letter of value verification, or appraisal from the recipient organization, in fact it is the law.

Of course it is always a good idea to get a receipt and determination of value at the time of the donation, especially if the total donations are over $5,000. Without a receipt, you really have no proof. If you failed to have a signed legitimate receipt of acceptance, or any real proof of value of substantial charitable deductions, and the IRS wants to see them, you may not be completely out of luck at audit since the organization can help you out after the fact if they want to do so.

What to do? In these cases, the receiving charitable organization can write a letter to help you. They will only do this if they believe it is true. If they know you from previous visits, they are more likely to be willing to help.

When they don't know you, you may be able to convince them it is true because they know that many people donate items to charities and never see a human being. They know people just "dump it in the bin", so to speak, and never ask for a receipt.

Go to the charitable organization with another large donation and this time see a real human being. Since you are currently bringing in another large donation, representative of many past undocumented donations, they may be willing to help you.

Since you have been donating for years, tell them you have been doing this for years and although you documented it yourself, are afraid you may need better proof of it. They do know that people often use their unattended bins and never have genuine receipts. Ask for a letter, something like the following example on their letterhead:

 

"Good Deed Charity

Date

Thank you for your continual and generous donations over the years. Your contributions of high quality salable merchandise has greatly helped our organization achieve our stated goals. Although we never professionally appraised your donations, we estimate that the value of your many past donations were in excess of $20,000 for each of the past several years.

We thank you for this current donation valued at approximately $4,250 and look forward to your continued generosity in the future.

Thank you,

 

Signature

 

(Name and title of officer)"

 

If your chosen charity won't give you a number you like, or their policy won't allow it, you can be more vague if need be. For example instead of estimated value of $20,000, they might be more comfortable with "the descriptions of the donations we received were accurate and in the stated condition at the time we received them, and the values are reasonable and comporable to our estimates." 

Of course there are no guarantees when the IRS comes calling. Even a letter without an appraisal may not be enough for larger donations, but it is certainly an indication and a point to be negotiated. To go in there with just your honest word and notes is not the best idea. Always get verification for large charitable donations. If not when donated, then later is harder. The above letter verifies a donation for the current year and also to a certain extent, helps establish that substantial previous donations had been made.

There is more to it, sometimes you have to prove your cost, but generally the IRS does not go there. The verification by the recipient organization is the most important part of solidifying non-cash deductible charitable donations.