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Cash Donation

Technical topics regarding tax preparation.
#1
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Client claimed that he put $40 cash in offering in church every weekly so his total donation to church is $2080 each year. I have repeatedly told him that he needs a receipt from church. He should put his cash in an envelope with his name on it so that the church is able to issue him a receipt at the year end. He has not able to provide me with any receipt from church.

This year I plan to refuse to put that donation on his schedule A because he does not give me any receipt. Am I right? What would you do?
 

#2
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You are correct. Without a written acknowledgement from the church for that the client looses what should be a valid charitable contribution - that is if he is being truthful.

Unfortunate as they are your only following the rules.
 

#3
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What would you do?


I'd report the deduction on the tax return and inform the client again about the documentation requirements. I'm not going to refuse a deduction which seems quite reasonable because the client didn't show me the receipt. I am not auditing them.

Seems this subject has been beat to death lately, whether it is substantiation of charitable contributions, business, expenses, dependency exemption, etc. For everyone that demands documentation for everything I still say that we are allowed to use common sense and trust our clients.

And now here come the naysayers...
 

#4
Nilodop  
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Contributions of $250 or More

You can claim a deduction for a contribution of $250 or more only if you have an acknowledgment of your contribution from the qualified organization or certain payroll deduction records.

If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions.

Amount of contribution. In figuring whether your contribution is $250 or more, don't combine separate contributions. For example, if you gave your church $25 each week, your weekly payments don't have to be combined. Each payment is a separate contribution.


Separate contributions of less than $250 are not subject to the requirements of section 170(f)(8), regardless of whether the sum of the contributions made by a taxpayer to a donee organization during a taxable year equals $250 or more.
 

#5
sjrcpa  
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Here OP knows there is no acknowledgment. With that knowledge, I say no deduction.

In general though, my clients give me their donation amounts. They have been informed of the documentation requirements. I do not audit them. I put the donation amounts they give me on their tax return.
 

#6
Nilodop  
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Yes but OP also says I have repeatedly told him that he needs a receipt from church. which isn't correct.
Last edited by Nilodop on 14-Oct-2020 1:00pm, edited 1 time in total.
 

#7
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Nilodop wrote:Tes but OP also says I have repeatedly told him that he needs a receipt from church. which isn't correct.


For example, the client can claim weekly cash donations of $249 to church (52 weeks) and no receipt is required. Correct?
 

#8
Nilodop  
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Sure, but he also has to make the contributions. Why are you doubtful of the reg.? Has there been a new development?
 

#9
Nilodop  
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Even a weekly contribution by payroll deduction has this rule.
(ii) Application of $250 threshold. For the purpose of applying the
$250 threshold provided in section 170(f)(8)(A) to contributions made by the
means described in paragraph (f)(11)(i) of this section, the amount withheld
from each payment of wages to a taxpayer is treated as a separate
contribution.


Preamble to regs.
Substantiation of Multiple Contributions
Several commenters asked whether the substantiation requirements apply to multiple contributions totaling $250 or more made to a single charity during a single year, when each contribution is less than $250. The conference report accompanying the Omnibus Budget Reconciliation Act of 1993 indicates that separate payments will be treated as separate contributions and will not be aggregated for purposes of applying the $250 threshold. H.R. Conf. Rep. No. 213, 103d Cong., 1st Sess. 565, n. 29 (1993). If there is no separate payment of $250 or more, substantiation under section 170(f)(8) is not required, even if the sum of the separate payments is $250 or more. Section 1.170A–13(f)(1) has been modified to clarify this. A commenter asked whether there must be a separate contemporaneous written ac­ knowledgment for each contribution of $250 or more. Section 1.170A–13(f)(1) has been modified to clarify that for multiple contributions of $250 or more to one charity, one acknowledgment that reflects the total amount of the taxpay­ er’s contributions to the charity for the year is sufficient.


The reg. itself, as quoted above:
Separate contributions of less than $250 are not subject to the require­ ments of section 170(f)(8), regardless of whether the sum of the contributions made by a taxpayer to a donee organiza­ tion during a taxable year equals $250 or more.
 

#10
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For example, the client can claim weekly cash donations of $249 to church (52 weeks) and no receipt is required. Correct?


As I read the rules - that is incorrect.

Know IRS pubs are not authoritative but go ahead and still take a look at page 20 "Cash contributions" of the link below.

https://www.irs.gov/pub/irs-pdf/p526.pdf

Would not sign a return claiming that kind of deduction and I sure as heck would not care to represent the client if they were audited on something like that. The client would be welcomed to walk over this if they so desired~
 

#11
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For example, the client can claim weekly cash donations of $249 to church (52 weeks) and no receipt is required. Correct?

felony transaction structuring?
:kidding:
 

#12
Nilodop  
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I've been trained to follow law, regs,, and other authorities, while also providing professional advice to clients that is sometimes ufavorable to them, but often favorable. My barber and my bartender (two different individuals, of course) told me it's OK not to get acknowledgements in the discussed circumstances. I usually go by their advice. When I'm in doubt, I go to an IRS Pub, like the one linked by Michaelstar. That Pub says this:
Amount of contribution. In figuring whether your contribution is $250 or more, don't com- bine separate contributions. For example, if you gave your church $25 each week, your weekly payments don't have to be combined. Each payment is a separate contribution.
If contributions are made by payroll deduc- tion, the deduction from each paycheck is trea- ted as a separate contribution.
If you made a payment that is partly for goods and services, as described earlier under Contributions From Which You Benefit, your contribution is the amount of the payment that is more than the value of the goods and services.
. Usually, I quit there, but in this thread I posted other sources. When will it end?

An acknowledgment is more than a receipt, and a recipt would be nice, but there are other ways to prove the payment.
 

#13
Joan TB  
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I am puzzled that everyone seems to be emphasizing what is required when the contribution is $250 or greater. I think we all agree that written confirmation from the charity is required for that level. And I think we all agree that the code/regs are pretty clear that multiple donations that may total more than $250 for the year don't have to follow the same rules as what is required for one donation of $250 or more.

However, OP's client is making multiple cash contributions of $40 each, so you need to look at what is required for that level of contribution. This seems to have more options that what Pub 526 spells out, but is still not "nothing".

https://www.law.cornell.edu/cfr/text/26/1.170A-13

(If this is not the most current version, someone please update me.)
 

#14
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$40 per week is what we’re discussing? $2k per year? I’m frightened by the lack of charity that would conclude $2k of donations to a church is to be questioned...
 

#15
Nilodop  
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Each Sunday morning, on way to church, guy stops at ATM and draws $40 out.
He puts the cash in the plate passed around in the church.
His wife is on his left, his kids on his right, and many nosy congregants are nearby. They all see what he does.
IRS asks for proof. All the individuals mentioned sign a statement as to what they saw.
Guy shows bank statements with the withdrawals posted.
Does he keep the deduction?

(1) In general. If a taxpayer makes a charitable contribution of money in a taxable year beginning after December 31, 1982, the taxpayer shall maintain for each contribution one of the following:

(i) A cancelled check.

(ii) A receipt from the donee charitable organization showing the name of the donee, the date of the contribution, and the amount of the contribution. A letter or other communication from the donee charitable organization acknowledging receipt of a contribution and showing the date and amount of the contribution constitutes a receipt for purposes of this paragraph (a).

(iii) In the absence of a canceled check or receipt from the donee charitable organization, other reliable written records showing the name of the donee, the date of the contribution, and the amount of the contribution.

(2) Special rules -

(i) Reliability of records. The reliability of the written records described in paragraph (a)(1)(iii) of this section is to be determined on the basis of all of the facts and circumstances of a particular case. In all events, however, the burden shall be on the taxpayer to establish reliability. Factors indicating that the written records are reliable include, but are not limited to:

(A) The contemporaneous nature of the writing evidencing the contribution.

(B) The regularity of the taxpayer's recordkeeping procedures. For example, a contemporaneous diary entry stating the amount and date of the donation and the name of the donee charitable organization made by a taxpayer who regularly makes such diary entries would generally be considered reliable.

(C) In the case of a contribution of a small amount, the existence of any written or other evidence from the donee charitable organization evidencing receipt of a donation that would not otherwise constitute a receipt under paragraph (a)(1)(ii) of this section (including an emblem, button, or other token traditionally associated with a charitable organization and regularly given by the organization to persons making cash donations).
 

#16
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Nilodop wrote:Does he keep the deduction?

No, irs hasn't accepted contemporaneous written record since 2005. Bank record or receipt has been required starting in 2006.
 

#17
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Wouldn’t his ATM withdrawal record be a bank record?
 

#18
Frankly  
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For everyone that demands documentation for everything I still say that we are allowed to use common sense and trust our clients.
Don't be fooled by the old "I put cash in the church plate" ruse. The guy is cheating on his taxes and you're being duped into going along with it.
 

#19
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“Don’t be duped...”

I hope you’re also requesting copies of medical records and receipts supporting all HSA withdrawals, “ticked and tied”!
 

#20
Frankly  
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A "receipt from the church" is not required. That would be additional documentation required for contributions of $250 or more, which $40 per week is not.

However, "substantiation" is still required for a cash contribution, regardless of the amount. That includes $40 in the church plate.
1.170A-15(a) wrote:(1) Bank record or written communication required. No deduction is allowed under sections 170(a) and 170(f)(17) for a charitable contribution in the form of a cash, check, or other monetary gift, as described in paragraph (b)(1) of this section, unless the donor substantiates the deduction with a bank record, as described in paragraph (b)(2) of this section, or a written communication, as described in paragraph (b)(3) of this section, from the donee showing the name of the donee, the date of the contribution, and the amount of the contribution.
 

#21
CathysTaxes  
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Most churches give their members numbered envelopes to keep track of donations. Or they can write a check. I can't believe someone goes to the ATM, withdraws the cash, and makes a donation unless they don't plan to deduct it.
Cathy
CathysTaxes
 

#22
Nilodop  
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No, irs hasn't accepted contemporaneous written record since 2005. Bank record or receipt has been required starting in 2006. I did not know that. I retired years before that. Wonder why they didn't cross-reference to the change from -13.
 

#23
Joan TB  
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Slippery Pencil: I would also like to know where I can find the 2005/2006 change about the record keeping. I am absolutely not questioning it - in fact, that is what I thought it was. But when I did my (little bit) of research, the 1.170A-13 is what I found, with no reference to later changes.

I know that my legal research skills are not strong, so I just want to learn. Baby steps.....
 

#24
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As a tax preparer, I don't believe requesting donation receipts for small cash donations makes any sense. EVERY deduction requires a receipt / substantiation, the only issue here is that W-2 employee - individuals generally don't have the opportunity to deduct everything that a business is allowed to deduct...hence the recordkeeping requirements were created (they already existed for business taxpayers). And the case with the unfortunate couple in TX(?) that donated over $20k in a given year (I think), maintained copies of cancelled checks, and didn't get a piece of paper with the right verbiage by the time their return was filed...poorly decided, in my view (with every other financial system requiring tax reporting, why not throw houses of worship into the mix?)...

If you feel obligated (don't ask me why) or you literally believe your client is lying to you, ask for the receipt for such a small, routine amount. By all means remind the taxpayer of the recordkeeping / receipt requirements - and with their thumbs-up, note it in your tax file and move on.

I still can't believe $2k of donations is a concern - I'd recommend going to the average larger church in your area, becoming a member, and volunteering as a collections-counter (a win-win, you won't have to listen to the preacher)...you'll be amazed how much cash is donated every week.

And not to mention, it'll (apparently) blow minds to see how many folks who make $100k a year hand over an actual tithe annually...
 

#25
Nilodop  
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JoanTB, the change was in 2018 with an option of applying it back to 2006.
(h) Effective/applicability date. This section applies to contributions made after July 30, 2018. Taxpayers may rely on the rules of this section for contributions made in taxable years beginning after August 17, 2006.

[T.D. 9836, 83 FR 36422, July 30, 2018]


It implements section 170(f)(17), which was passed in 2006.
I. Cash, Check, or Other Monetary Gift Substantiation Requirements
Section 1.170A–15 implements the requirements of section 170(f)(17) for cash, check, or other monetary gift contributions, as added by the PPA, and clarifies that these rules supplement the substantiation rules in section 170(f)(8).


(17) Recordkeeping
No deduction shall be allowed under subsection (a) for any contribution of a cash, check, or other monetary gift unless the donor maintains as a record of such contribution a bank record or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution.
 

#26
Jake  
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The only criticism I have of the charitable giving substantiation requirement is the requirement that the taxpayer have that in hand by the due date of the tax filing.
 


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