Contribution Substantiation

Posted on Wednesday, December 21, 2011

In order for a donor to take advantage of a contribution on his 1040 as a charitable deduction, he is required to maintain a bank record (bank statement, canceled check or credit card statement) or written communication from the donee documenting the donation. The documentation must show the date paid, the name of the charity and the amount of the donation.

It is the donor’s responsibility to obtain a contemporaneous written acknowledgement from the donee for single donations of $250 or more. Contemporaneous simply means the documentation must be obtained by the donor before the donor files his tax return for the year he is taking the deduction. In addition to the written documentation requirements noted above, the written acknowledgement must also state whether the donee organization provided any goods or services in return for the contribution.

If any goods or services were provided, a quid pro quo contribution exists. Under a quid pro quo contribution, the written documentation must include a good faith estimate of the value of the goods or services provided to the donor. The written acknowledgement requirement is also lowered to more than $75 instead of $250 for quid pro quo contributions. It is the donee organization’s responsibility to provide a written acknowledgement for quid pro quo contributions. A penalty of $10 per contribution (maximum of $5,000 per fund raising event or mailing) will be imposed on the donee organization for each quid pro quo contribution of more than $75 that it fails to make the required disclosure for.

It is good practice for nonprofit organizations to provide each donor making a contribution of $250 or more with a written acknowledgement to lessen the burden on their donors. Many nonprofits make it a practice to provide thank-you letters to donors which provide the necessary information for the donor.

Posted by: Carrie Minnich, CPA

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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