Non Cash Charitable Donations

[MAJ]

The last post about "Various" reminded me of something I've been meaning to discuss.
So we all have the same scenarious I presume. Client donates 'x' # of bags of clothes to their local charity & get a receipt. Of course the receipt is 95% of the time blank. On Form 8283 we have the ridiculous columns:

Date of Contribution: Okay - That's an easy one.
Date Acquired by Donor: Seriously - There's 247 items. I mean I have them pick an average.
How acquired by Donor: 99.99% of the time - Purchased
Donors Cost or Adj Basis: Really - My clients look at me like - Are you kidding?
Fair Market Value: Much easier the past few years with various sites & software but
how do you handle this?
Method Used: Again, easier - I put down the sites the clients used to figure their
values (Its Deductible, Salvation Ary, Good Will, etc.

How do others handle this? Also on the cash end. Do you require any type of proof?

Though I do have some now getting well trained and pleasantly pleased with their results,
It's usually a hastle to get clients to follow a good routine. I feel many clients are cheating themselves out of some great donations expenses. I send email reminders during the year to follow these simple rules:

1) Before stuffing items into the bag(s) - Write down what they are - Just keep a talley
12 jeans - 4 dress pants - 2,187 rock t-shirts, 4 pairs of socks that don't match -
you get picture.
2) Lay them out on the floor or bed and take a digital picture.
3) Place clothes neatly (haha) in the bag(s).
4) Create itemized list of clothes and all other items donated.. - No $$ values yet.
For non clothes be as specific as possible and take pictures to show quality.
5) Take them to charity site and when you get 'their paper' - Ask the person in charge to sign
your itemized list and date it to verify the items received.
6) Look up at your leisure the values on the web sites provided and document same. Print
copy of value page from web site and put with taxes.

This work - that may take two hours or less can make a huge difference on their return. Few years back I cleaned house - basement, etc. Couch - Dining room set - TV- BILLIONS of clothes (I have 4 kids that are [of course] no where near each other in size for hand me downs). - I was conservative and took an almost $4,000 non cash. that made more than $1k differnece in my taxes. Now if a few decent hours isn't worth $1,000 to you - I don't know what is!

I even thought of offering a service to do things like that -- Help clean out / donate the goods. For a fee which would most likely be re-couped when they did their tax returns.

[David1980]

I tell them to keep the individual donations below $500. The benefit is by keeping it below $500 you don't have to complete columns D, E, or F on the 8283. So that eliminates date acquired, how acquired, and basis.

The item I have the hardest time with is the FMV. I haven't broken my clients just yet. They often donate a bag of used clothing and want a deduction for the full retail price they paid 3 years ago. I have taken more than one client to value village as a training aid (just to shock them in how little stuff actually sells for). It depends on my mood a bit on that.

I also yell at them every year about not having real documentation. I mean everyone's phone has a camera in it anymore, so there's no excuse not having photos of what you donated.

For the times I have to complete D, E, F, I'm sure I do like many. Estimate a date, assume it's all purchased (unless there's substantial items in there that we know weren't), and guess at cost.

[JohnH]

If their valuations are over $500, I give them a form to fill in, sign, and date. It mimics the layout of the 8283. So the info I enter concerning FMV and original cost is what they say it is, not something I pulled out of thin air. And if they 're audited, I can show where I got my numbers.

[MAJ]

Mimic 8283

If their valuations are over $500, I give them a form to fill in, sign, and date. It mimics the layout of the 8283. So the info I enter concerning FMV and original cost is what they say it is, not something I pulled out of thin air. And if they 're audited, I can show where I got my numbers.

That's actually not a bad idea. I mean when we get there we banter about on average how old were the donated items. 1 year; 2; 10? Then we try to figure a basis. There are different types of people. Those that shop to shelf; middle shelf; and the ones that bought the stuff i donated last year at the Church Thrift shop. I tend to know my clients but that's not helping them in an IRS pinch.


Sounds nuts but for any decent items I purchase now I try to scan the receipt and file it under its general heading. The receipts they hand our today (I AM CONVINCED) are designed to self destruct / desolve after a few months or a year (tops). I suppose OCR would be best for searchability. The full version of Nitro PDF (I had mentioned in a previous post) has an OCR option for $119 - that's full product and OCR for $119. Not bad really. Still trying to review the full abilities. Could be great to use for scanned client data and seachability later in life.

It's Friday people... And I am thankful for that... Had a great nap on the bus the morning while traveling to the city (those double sided candles really burn sometimes). Enjoy the time while we have it --- The fun starts.................................... Soon!

[Burke]

I like John's idea. And I require the receipts, make them value them, and have an itemized list. If I feel values are inflated, I resort to TB page for FMV and challenge TP to prove otherwise. I have never filled out an 8283 where they know when they bought things, unless it was stock. So I use "various" on nearly every one, especially since most of the time there are numerous items. And the original cost is almost always blank, except for stocks as I mentioned. I will photocopy those receipts as well, along with all the other tax documents.

[Burke]

How do others handle this? Also on the cash end. Do you require any type of proof?

Absolutely, no receipt -- no deduction.

[MAJ]

Blank -- does my software allow that????

I like John's idea. And I require the receipts, make them value them, and have an itemized list. If I feel values are inflated, I resort to TB page for FMV and challenge TP to prove otherwise. I have never filled out an 8283 where they know when they bought things, unless it was stock. So I use "various" on nearly every one, especially since most of the time there are numerous items. And the original cost is almost always blank, except for stocks as I mentioned. I will photocopy those receipts as well, along with all the other tax documents.

You leave the original cost blank? Never had a problem with that? i don't think my software will allow me to leave it blank. Now you have me 2nd guessing... Ding Dang... Hmmm.. That's always a joke item if you ask me. If you have one item - sure -- easy guess. 427 things? Hah!
If it will let me leave it blank I'm sure it sends up all kinds of RED audit warnings.. Don't like RED Audit warning messages!!

[JohnH]

Here's one version of the statement. I have it in an Excel spreadsheet and sometimes modify it for unusual situations.

[RitaB]

Well, well

I tell them to keep the individual donations below $500. The benefit is by keeping it below $500 you don't have to complete columns D, E, or F on the 8283. So that eliminates date acquired, how acquired, and basis.

I feel like such a moron. I gotta start reading these forms. Thank you, David1980.

[luke]

Agree

with Burke!

[MAJ]

No Tickee - No Washee??

Absolutely, no receipt -- no deduction.

Wow -- I do not require a receipt for each and every entry. Should I? You've got me over thinking on a Friday afternoon......

Do the rest of you all REQUIRE a receipt for each donation? don't get me wrong I have some clients that are very organized and have them right there - I also have some that don't but I do know a few of them donate to church because they go to the same church I do. They can easily get a printout like I do...

I actually have one client that donates a lot. Nurse Pracitioner in the Cancer wing. She had cancer herself. She donates a decent amount anually - She had one check she chouldn't find when we did the taxes but knows she donated it. $500 or more.. She wouldn't take the donation. Clients swings all around the ropes on this one..

I have a headache now... Making me feel like I need to audit people instead of providing a level of due diligence. Many times I try to make them understand that if they are exagerating their donations by say $1,000 they may get an extra $250 but is that worth the IRS breathing down your neck? I've tried all kinds of tactics. Vanilla envelope - Pull all donation receipts in their during the year - Only pay by check - Use quicken. Disorganized peope are who they are.

[Uncle Sam]

Charitable Donation

MAJ - you seem to be new on this board and a fairly new tax pro.

You apparently haven't been through the audit process yet to actually experience what documentation is required to get IRS clearance.

Two years ago I had a correspondence audit on a client where IRS was auditing medical deductions and charitable donations.

Since the charitable donation is the subject here -
Not only did I submit photocopies of every donation check - but attached whatever paperwork was saved by the client that went along with the check - i.e. the formal acknowledgement letter from the charity, the solicitation describing the charity, etc.

100% acceptance.

There were a couple of small donations that client had no substantiation for - so IRS of course couldn't accept it - but whatever we did submit with paperwork - IRS accepted - no dispute.

[Burke]

If it will let me leave it blank I'm sure it sends up all kinds of RED audit warnings.. Don't like RED Audit warning messages!!

What sends up red audit warning messages is the amount, not the other info. The only audit I ever had on contributions was for someone who tithed at his church, it was all cash (checks), and he had every one plus the receipt from the church. And even then, the auditor told me it was because he had another item on his return which caused it to fall out for audit, neither of which by itself would have done it. A loss on a Sche C. Fully documented. No change on audit.

[Burke]

Wow -- I do not require a receipt for each and every entry. Should I? You've got me over thinking on a Friday afternoon...... Do the rest of you all REQUIRE a receipt for each donation?

I think you misunderstood. You said cash. And for cash, yes, I require the receipt. Clients often ask about the Xmas Salvation Army kettles, cash in the collection plate, etc. Also, for goods, I require the receipts. If they have cancelled checks, or copies of those checks -- you can hardly get the originals any more -- I will take those, although I advise they need the receipt from the organization too. Most of my clients now will send me the receipts, and if they don't, I require an itemized list of organizations and the amounts donated, dates, etc. I have out-of-state people, and for those, I prefer the listing (except for the goods donations) than all those receipts which I have to mail back. And you get an innate sense of who is making things up. You know, the ones that say "same as last year." And "what is the amt they let you take?" And I have one who used to want to always add another $1,000 to the church receipt for cash each Sunday. He probably did contribute that, but he doesn't do it anymore due to the more stringent rules and the fact that I won't put it on the return.

[Lion]

Thanks

Thank you, John.