Haitian Contributions

[Snaggletooth]

Have any of you been confronted with this yet?

CLIENT: I'm going to contribute $500 to the Red Cross for Haiti. We can take this off.
PREPARER: You mean you've already done this?
CLIENT: Oh no! I get paid on the 25th and I'm going to send them this money out of my next paycheck.
PREPARER: Well, you have until Feb 28th.
CLIENT: Yeah I know. But we can take the deduction anyway so I can get Rapid Refund.

OK guys and gals. Whadd'ya do with this guy?

{Editorial comment - the govt creates this situation when they allow retroactive filing of current year stuff]

[erchess]

LOL Snags

First of all Rapid Refund is a trademark of a certain company and the guy wouldn't be talking to you if he were going to use that company.

Second I wouldn't personally write off a contribution that hadn't been made yet but I do agree that the government is just asking for such with their retroactive deductions. I would guess that a legal case based on the text of the law and its legislative history could be made either way but my concern would be that charitable contributions are a point of emphasis with the IRS and we could get in trouble.

I also think the title of your thread is misleading. Only one or more Haitians could make a "Haitian Contribution". Your client wants to make a "Haiti Contribution". Sorry but my Mom is a retired English Prof.

[S T]

I would

Advise the client,

You provide me with a receipt for the contribution $$ amount and the Date to meet the timeframe, I will prepare your return with that deduction for 2009, otherwise it will be used for your 2010 Tax Return Deductions.

If the client is doing it through email, they should receive "an almost" immediate receipt, but that is not gospel.

I donated our Hilton points to Haiti a month ago, and I just received a confirmation that they received the request, but not an actual confirmation of the the $$ amount. Mute point, as I can't use it as a Charitable Contribution.

Sandy

[Bees Knees]

When you think about it, this is no different than a person taking an IRA contribution or a SEP contribution deduction on a return we prepare where the client makes the contribution just before the deadline.

In fact, we often use this as a planning technique. We tell the client that we can file the return now with the deduction claimed on the return, and the client will get the refund in time to help fund the contribution right before the filing deadline.

I would think the Haiti charitable contribution deduction would be no different. Simply say in your instruction letter to the client that the refund (or balance due) amount listed on the return is based on the client making a contribution of $XXX by February 28, 2010. If the client forgets or fails to do so, additional fees will be charged by you for having to file an amended return for the client.

[BP.]

When you think about it, this is no different than a person taking an IRA contribution or a SEP contribution deduction on a return we prepare where the client makes the contribution just before the deadline.

In fact, we often use this as a planning technique. We tell the client that we can file the return now with the deduction claimed on the return, and the client will get the refund in time to help fund the contribution right before the filing deadline.

I would think the Haiti charitable contribution deduction would be no different.

Theory sounds good, except don't donations require documentation by the time of filing, whereas SEP or IRA contributions don't?
TTB 4-19:
"Required written acknowledgments from the charity must be received by the taxpayer by the EARLIER of date of filing or due date of the return . . . "
(Oh gosh, do I loathe even attempting to contradict hallowed Bees Knees.)

[AJsTax]

I concur with BP.

Charitable contributions are one of the specific items listed on due diligence for a preparer and the receipt must be in hand by the time of filing. Sounds like this return will have to wait for the receipt before being sent. We are only talking two weeks.
Just a side comment, I believe you will find that the IRS has said that Rapid Refund beongs to them and no one else can use that term without the IRS name included.

[gkaiseril]

The requirement for this elective treatment is:

• The contribution is made after January 11, 2010 and before March 1, 2010.

See the 1/22/2010 Haiti Charitable Contributions update by the TaxAuthority Update Bulletin

http://www.thetaxbook.com/updates/thetaxauthority_update_service/pdf/bulletin/1-22-2010_update.pdf

[Bees Knees]

Theory sounds good, except don't donations require documentation by the time of filing, whereas SEP or IRA contributions don't?
TTB 4-19:
"Required written acknowledgments from the charity must be received by the taxpayer by the EARLIER of date of filing or due date of the return . . . "
(Oh gosh, do I loathe even attempting to contradict hallowed Bees Knees.)

I'll meet you half way on this one. You are correct if the contribution is $250 or more.

However, if the contribution is less than $250, a "written acknowledgment" from the charity is not required. The rule you mention only applies when a "written acknowledgement" from the charity is required.

Thus, if the client wants to donate $500, have him do three separate donations on three separate days...one for $200, another for $200, and one for $100.

Then my theory is perfectly OK.

[AJsTax]

I don't see it that way

I'll meet you half way on this one. You are correct if the contribution is $250 or more.

However, if the contribution is less than $250, a "written acknowledgment" from the charity is not required. The rule you mention only applies when a "written acknowledgement" from the charity is required.

Thus, if the client wants to donate $500, have him do three separate donations on three separate days...one for $200, another for $200, and one for $100.

Then my theory is perfectly OK.

Any contribution must have written proof, be it a receipt, cancelled check, etc. If over $250 then must have written ack from the charity, yes. But every one must be proven in hard copy.
I would still refrain from filing until I saw proof.

[BP.]

I'll meet you half way on this one. You are correct if the contribution is $250 or more.

However, if the contribution is less than $250, a "written acknowledgment" from the charity is not required. The rule you mention only applies when a "written acknowledgement" from the charity is required.

Thus, if the client wants to donate $500, have him do three separate donations on three separate days...one for $200, another for $200, and one for $100.

Then my theory is perfectly OK.

Halfway? Cash donations require documentation regardless of amount, right? Which won't be available at time of filing. And our context is per OP- a contribution amount of $500. The lesser amounts you mention may not need a "written acknowledgement" but certainly one of the records listed on TTB 4-19. I get it . . . This is one of your tests for us, right?

[PIGLEE]

He would save more money by, not doing the "fast refund" instead of doing the donation. Then he can do his donation for next year. What do you want to bet he doesn't even have enough to itemize deductions!

[Bees Knees]

Any contribution must have written proof, be it a receipt, cancelled check, etc. If over $250 then must have written ack from the charity, yes. But every one must be proven in hard copy.
I would still refrain from filing until I saw proof.

Halfway? Cash donations require documentation regardless of amount, right? Which won't be available at time of filing. And our context is per OP- a contribution amount of $500. The lesser amounts you mention may not need a "written acknowledgement" but certainly one of the records listed on TTB 4-19. I get it . . . This is one of your tests for us, right?

Oh contrary, my friends. Here is the law:

IRC Section 170(f):

(8) Substantiation requirement for certain contributions
(A) General rule
No deduction shall be allowed under subsection (a) for any contribution of $250 or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment of the contribution by the donee organization that meets the requirements of subparagraph (B).

What is a contemporaneous written acknowledgement? Read on…

(C) Contemporaneous
For purposes of subparagraph (A), an acknowledgment shall be considered to be contemporaneous if the taxpayer obtains the acknowledgment on or before the earlier of—
(i) the date on which the taxpayer files a return for the taxable year in which the contribution was made, or
(ii) the due date (including extensions) for filing such return.

The code specifically applies the rule that the taxpayer obtain this acknowledgment prior to filing the return to those contributions of $250 or more.

It is NOT…I repeat…It is NOT a requirement listed for contributions of less than $250. Contributions of less than $250 need only some kind of written receipt, that could be obtained anytime after filing the return, just like any other deduction.

[Bees Knees]

It is NOT…I repeat…It is NOT a requirement listed for contributions of less than $250. Contributions of less than $250 need only some kind of written receipt, that could be obtained anytime after filing the return, just like any other deduction.

Speaking of obtaining written records after the return is filed, for any of you who have ever represented a taxpayer at audit, you know what I mean. We do it all the time. Our client has NO written records of a deduction. The auditor wants something in writing. The auditor knows our client has no written records. Yet allows the deduction if our client gets written records from the credit card company, or the business where the item was purchased, or some other form of written evidence.

We do this all the time. No problem. No requirement that the written records be obtained prior to the original filing of the return, because the law does not require it.

[Gene V]

Have any of you been confronted with this yet?

CLIENT: I'm going to contribute $500 to the Red Cross for Haiti. We can take this off.
PREPARER: You mean you've already done this?
CLIENT: Oh no! I get paid on the 25th and I'm going to send them this money out of my next paycheck.
PREPARER: Well, you have until Feb 28th.
CLIENT: Yeah I know. But we can take the deduction anyway so I can get Rapid Refund.

OK guys and gals. Whadd'ya do with this guy?

{Editorial comment - the govt creates this situation when they allow retroactive filing of current year stuff]

Back to the main question--Yes, I would probably give the client the deduction--mainly because most of my client are long-term clients (over 20 years) and trust them in making
The donation. I seldom take new clients.

[BP.]

The code specifically applies the rule that the taxpayer obtain this acknowledgment prior to filing the return to those contributions of $250 or more.

So after mixing some apples with our oranges by considering contrib amts not in OP, are we now back to where we started, and in some sort of agreement about needing WA for the $500 before filing? Just trying to apply language of TTB 4-19 to the specific at hand. Cheers!