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Providing Donors With Tax Acknowledgements

 A donor may be eligible to claim a deduction on his or her tax return for qualifying charitable donations. However, it is not the recipient organization’s role to determine the tax consequences of any donor’s charitable actions. Such a determination is, as a matter of tax law, ultimately between the donor and the Internal Revenue Service.

A charity that is recognized as tax-exempt by the IRS may provide a written acknowledgment to the donor for any cash donation. In fact, for any donation of $250 or more, the IRS requires the recipient to provide a written acknowledgment. According to the information posted on the IRS website, the acknowledgment should include the name of the recipient organization; the amount of cash contributed; a description (but not value) of non-cash contribution; a statement that no goods or services were provided by the organization (if that is the case); a description and good faith estimate of the value of goods or services, if any, that the organization provided in return for the contribution; and a statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible religious benefits if that was the case.

Note that the acknowledgment is for cash contributions. Sometimes a donor gives an item of property to a charity and requests a receipt indicating the value of the property donated. However, the proper procedure for the charity is to provide a receipt describing the property, but not assign a value to it. The donor is then responsible for properly valuing the donated property when claiming an income tax deduction for it. There is one major exception to these rules for donated property: motor vehicles. The IRS has specific rules for recipient organizations that receive vehicle donations. Consult the IRS guidelines (https://www.irs.gov/charities-non-profits/charitable-organizations/irs-guidance-explains-rules-for-vehicle-donations) to ensure compliance with these special rules.

Also, notice that the written donation acknowledgment should state, if true, that no goods or services were provided by the recipient organization in exchange for the donation. If the charity gives something back for the cash contribution, then the contribution is, by definition, not truly a “donation,” but is a payment for goods or services. Of course, sometimes a charity provides a small gift or other benefits in return for a donation that is worth far less than the amount of the donation. In such instances, the charity should state the value of the goods or services given in exchange as part of the written acknowledgment. The donor can then claim a deduction for the amount of the cash given minus the value of the goods or services received in return.

Finally, it should be noted that services rendered to a charity are never eligible for tax deductions. An organization benefiting from service time from a volunteer should not provide a tax acknowledgment to the volunteer. There is no provision in the tax code for a volunteer receiving a tax benefit for such service.

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Clergy Financial Resources
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11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421.0101
Fax: (888) 876.5101

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (763) 425-8778 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com

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