Deadline for contribution substantiation approaches.

• Author: Kosinski, Thomas M.

Beginning with 1994 returns, taxpayers claiming charitable deductions for cash and noncash contributions of $250 or more are required to obtain adequate written substantiation from the donee organization or charity. Reliance solely on canceled checks for substantiation of the claimed deduction is no longer an option. Initially under these new rules, taxpayers filing 1994 tax returns were required to secure such substantiation by the original or extended due date or, if earlier, the actual filing date of their 1994 returns. Many taxpayers experienced difficulty in obtaining written acknowledgments from the donee organizations or charities. Therefore, in March 1995, the IRS issued Notice 95-15, which provides taxpayers with limited relief; taxpayers were given until Oct. 16, 1995 to obtain written acknowledgments from donee organizations or charities for charitable contributions of $250 or more.

Background

Stricter substantiation requirements for taxpayers claiming a deduction for charitable contributions of $250 or more, made on or after Jan. 1, 1994, have been in effect since the enactment of Sec. 170(f)(8). Generally, taxpayers must obtain a "contemporaneous written acknowledgment" from the donee organization or charity to support the contribution, unless the donee organization files a return reporting information sufficient to substantiate the contribution. Most charitable organizations have no obligation to report such information. Therefore, the responsibility to secure substantiation rests solely with the taxpayer.

This written acknowledgment need not meet any prescribed form; it may consist of a letter, postcard or computer-generated form. The charitable organization may either prepare a separate acknowledgment for each contribution of $250 or more, or provide an annual report with the required information for contributions of $250 or more. The acknowledgment must also include the amount of the cash contribution or a description of noncash property contributed and the extent to which any goods or services were provided in return by the donee organization or charity, as well as a description and good-faith estimate of the value of the goods or services provided.

Taxpayers must obtain an acknowledgment for any single charitable contribution of cash or property that amounts to $250 or more. Therefore, a series of smaller contributions to the same charity that equals or exceeds $250 on a combined basis during the same year would not be...