IRS to charities: Relax, reporting changes voluntary.
You likely know that charitable organizations must provide a letter of acknowledgement of gifts to its donors that contribute $250 or more in a calendar year. This letter should also state whether the donor received any goods or services in exchange for the gifts.
The IRS proposed a designated form for organizations to report these gifts, along with the donors’ names, addresses, and taxpayer identification numbers. It received a lot of feedback…and listened.
First, some background: this new form would be furnished to the IRS, and organizations must then give each donor a copy of the information return (Form 990) containing data that pertained only to that individual or entity.
The IRS presented this proposal in response to taxpayers’ claimed deductions being denied, because organizations didn’t provide a contemporaneous written acknowledgment (CWA) of their gifts.
The donors asked if the donee organization could simply file an amended information return, but since no official form exists for reporting this information, filing a new 990 would not meet the CWA requirement.
Charitable organizations remain understandably concerned about the burden imposed by this additional reporting. In an unusual move, the IRS emailed organizations to assure them completing the additional form would be voluntary. Most organizations can continue to operate as they have been.
Don’t risk annoying your donors—and potentially losing future funding sources—by failing to provide contemporaneous substantiation of gifts.
Thank supporters with a letter that includes their name, address, amount of gift and a note clarifying if they received any goods or benefit for the gift. If a benefit of any kind was received by the donor, state the gift’s value and the available deduction amount.
If you need accounting or tax assistance for your nonprofit, feel free to email us at Lynn@OnlineStewardship.com or call (904) 398-4747. If your organization is bigger and you need an audit, contact our parent firm, Patrick & Robinson CPAs at Office@CPAsite.com or (904) 396-5400.
