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Charitable Deduction Substantiation

As we learned at the 2012 Tax Conference, the IRS is going to really begin to crack down on charitable deductions without substantiation or a receipt. The rule is that taxpayers making a contribution of $250 or more must obtain a receipt to qualify for a deduction on their tax return. This rule is not new however the enforcement has increase and the IRS is being very specific. Any acknowledgement from a charitable organization might not be acceptable if it doesn't have the correct wording. The acknowledgement must have the date contributed, the amount, and whether or not the charity provided any goods or services in exchange for the contribution. If the acknowledgment fails to state that no goods or services were exchanged, the IRS may disallow the deduction. It is imperative that the taxpayer keep good records throughout the year and to read the acknowledgement letters when they are received. It would not be unusual for an acknowledgment letter to have a separate card with all the correct wording but if the taxpayer is unaware and doesn't read all the information they may literally throw away their deduction. Pay attention and when in doubt, save it; this will lead to an easier tax season and the assurance that you get all the deductions for which you are qualified.

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