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November 11, 2015

IRS Weighing New Option for Documenting Donations

Donors who report gifts of $250 or more to the Internal Revenue Service may get a new way to substantiate the contributions under a pending IRS rule change, according to Bloomberg BNA. The new rule, proposed in September but not yet effective, would carve out an exception to the current requirement that donors provide a "contemporaneous written acknowledgment" from the recipient if the charity voluntarily reports details about the gift and giver in its own tax filings.

The proposal appears aimed at foreclosing disputes between the IRS and taxpayers who claim gift deductions without providing the traditional contribution receipt, arguing that a listing of the donation on the charity's Form 990 qualifies as substantiation, a trio of attorneys writes for Bloomberg BNA.

The new regulation posits that the IRS will develop a specific-use document for charities to optionally report detailed information on gifts. That "donee report," if filed by the recipient, would serve as substantiation for tax purposes if the contributor is audited, thus clarifying that simply listing a donation on a Form 990 does not.