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Tax Facts - Charitable Contribution Deduction New Requirements for 2007 Returns

Once upon a time in the Land of the Misinformed, there was a myth that all charitable contributions of cash were deductible even if you did not have a receipt of any type to prove the contribution was made. At the end of each calendar year the good people of the land would throw all of their loose change into church collections and street corner holiday collection kettles and containers and then when they went to see their Tax Preparer or they prepared their own personal returns they would estimate how much loose change they had contributed for the tax year and take a deduction for contributions to miscellaneous organized charities. Sometimes they would do that estimate based on a random percentage that they believed was an acceptable percentage of charitable contributions that would not trigger an audit by the Tax Collector of the Land.

Well, somewhere along the way the Tax Collector of the Land decided that there should be stricter rules related to proof of charitable contributions and that is why we are now faced with new stricter rules for the 2007 tax year for charitable contributions. The new rules indicate that you cannot deduct any cash contribution unless you have a bank record that documents and supports the donation such as a cancelled check or a credit card receipt or a written statement from the charity that meets new tax law requirements. Additionally if the cash contribution is $250 or greater a bank record is not sufficient proof; you must obtain a statement provided by the receiving charity.

So the people in the Land of the Misinformed that used to go to their tax preparer’s office and make a statement that was something like, “just take the maximum I’m allowed to take for charitable contributions” are really out of luck because before when their preparer told them there was no specific allowable percentage or amount they would sometimes just pull an amount out of the air and indicate that it was definitely a reasonable and provable number. Now - NO documentation, means NO deduction.

If it is the end of the year and you are short on cash but still want to get the benefit of the tax deduction in the current tax year it is acceptable to charge the contribution to a credit card as the contribution is deductible in the year the charge was made, not in the year the payment will actually be made on the card.

The moral of the story is that if you say you gave a contribution to charity, and it is your intention to deduct the contribution on your tax return, you must be able to provide the appropriate proof that you did in fact make the contribution to an eligible recipient. So as the laws of the land become stricter it may become more necessary to pay closer attention to your tax planning and documentation not only at year end but throughout the entire year. And just in case you think you can take the deduction and claim later that you were unaware of the changes in the tax law and therefore should not be penalized if your charitable deductions are later questioned, the typical IRS response to that defense is that ignorance of the law is not a defense. So if you live in the Land of the Misinformed you might want to consider moving or as a less radical solution take the time to stay informed as much as possible or to consult professionals as needed to avoid being misinformed.


Giving contributions to those in need is a wonderful way to observe the Holidays. Remembering to celebrate and honor our ancestors and the holiday traditions they handed on to us is another. For ideas and holiday inspiration take a peek at this collection of short stories, poems and quotes about our American holidays.

An American Holiday Patchwork - A Heartwarming Collection of Short Stories and Poems and Quotes

I hope you're enjoying Tax Facts on the Taxing Subject of Taxes!


Any U.S. tax advice contained in this electronic communication was not intended or written to be used, nor can be used, by any recipient of this communication for the purpose of avoiding penalties that might be imposed pursuant to the Internal Revenue Code or U.S. Treasury Regulations, or any other state or local law or regulation.

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