Are You a Smart Taxpayer? Don’t Forget These 5 Charitable Donation Tips
The holiday season is full of cheer, joy, family, food, and good will. That’s why this is one of the best times of the year for charities to solicit donations. And while the holiday season allows us the opportunity to reflect on our blessings and offer support to others, it’s also an opportunity for unscrupulous scammers to pretend to be legitimate charities and cheat hard working people from their hard earned money.
The holiday hustle and bustle may also mean you forget to properly document your donations needed for tax purposes.
Here are five charitable donation tips to help you avoid scammers and reap the benefits of giving before the end of calendar year.
Do your research to avoid charity scams. Giving to a meaningful cause is commendable, but you’ll need to do some research prior to donating to ensure you are contributing to a legitimate charity. Be extra vigilant against charities that sound similar to nationally recognized organizations. These fake charities will likely use names and websites that sound like legitimate organizations in order to draw you into their snare.
Take the time to double check their legitimacy by using the IRS.gov feature known as the Exempt Organizations Select Check, that helps you to find real, qualitiy charities to which donations may be tax deductible. In fact, more than 1 million charities are registered with the Internal Revenue Service, so do some investigation as needed to find the best organization that truly gives the majority of their revenue to a worthy cause, rather than their operating expenses.
You can also confirm a registered charity by checking with Texas’ Department of Justice Approved Charitable Organizations list found on their website.
Confirm that your donation is tax-deductible. Many types of contributions to an approved charity are tax deductible, but you’ll want to confirm beforehand by making sure they are qualified by the IRS. Also, keep an accurate set of records by getting a written acknowledgement or receipt for your donations.
In order to claim a charitable deduction you’ll need to itemize your deductions, and as previously mentioned, only contributions to qualified charities are deductible. Furthermore, monetary donations such as cash, check, or credit card, are only deductible if you have a record of the contribution. A receipt or letter from the charity is sufficient and should indicate the name of the charity, the date of the contribution, and the amount. If a contribution is made via payroll deduction, then a verifying document such as a W-2 should be maintained as proof of the donation.
Always make sure to keep the pledge card showing the name of the charity.
Keep an eye out for personal information thieves. There are several warning signs that you may be dealing with a scammer. Keep an eye out for thieves who may ask for information such as your Social Security number or for personal banking passwords. This information can be easily used to steal your identity and money.
While using your credit card to make donations is quite common, you’ll want to be exceedingly careful when providing this information to a charity. Once again, make sure that the transaction will be a legitimate transaction with a legal, verified charity.
Non-cash contributions are deductible too. Non-cash contributions to organizations can include food, art, jewelry, clothing, furniture, electronics, appliances, and linens. The deductible amount is the fair market value (FMV) of the items at the time of donation, and just as with cash donations, the donation must be properly documented in a detailed list of what was given and the charity who received the gifts.
When the FMV of the gifts total $250 or more, the charity must provide acknowledgement of the donation. A non-cash contribution of $500 or more requires additional recording keeping including the IRS Form 8283 and a donation of $5,000 or more (such as a property) requires a certified appraisal.
There are other ways to give and make a positive impact. The holiday season always tends to bring to mind the blessings that we have; giving back doesn’t always have to include money or items. There are tons of volunteer opportunities available for citizens to give something back during the season. Volunteer South Texas is a local organization that helps to provide volunteer opportunities all throughout the McAllen metro and Rio Grande Valley.
McAllen CPA, Abigail Y. Murray, LLC, is here to answer your questions about 2016 donations or about the documentation required to claim deductions.
Charitable contributions are only deductible in the year in which you made them. If you have any questions regarding the process of utilizing your donations as a tax deduction, make sure to contact the office of Abigail Y. Murray, CPA, LLC at (956) 800-5600.