how do u handle state auditor who insists upon receipts for clothing donations

[DANDEM]

several clients have been audited by state and disallowed their charitable non cash donations because they didn't have actual receipts given by the charity. fed regs state that u can maintain your own log of what was given, method of determining valuation etc. each donation was under $250 and each client had approx. 8 donations what do u think

[ATSMAN]

May I ask which state is doing the auditing?

How did they value the used clothing? Have you compared to the list in TTB or the Salvation Army list?

Did they drop the clothing in those bins? They handout those receipts wholesale if you ask for it and you fill in.

[DANDEM]

s carolina

[FEDUKE404]

No receipts for donations ?

It doesn't surprise me that the IRS is (ahem!) requiring a receipt for a charitable contribution, especially when it appears Form 8283 was also likely needed for a properly-prepared income tax return.

There are many places where you can "donate" stuff - look for drop-off points in local shopping center parking lots - and if you look hard enough you will often see something like "items placed here cannot be treated as a charitable donation due to . . ."

The NC DOR several years ago was getting extremely aggressive looking for folks who managed to have high amounts of "non-cash contributions" to Goodwill on a regular basis. The IRS never raised an eyebrow, but the state smelled blood in the water and ruined the party of many folks who were heretofore enjoying their annual write-offs. These would include the "heck, each bag of clothes/junk was certainly worth at least $100, you know...." contributors.

As for the need for a receipt, even under the circumstances stated, strongly suggest you review Publication 526 ( http://www.irs.gov/pub/irs-pdf/p526.pdf ) to include page 19. While it is likely wise to keep a detailed inventory of non-cash items donated, and how the donation value was determined, I am unaware where having such negates the current, very firm IRS rule for the need of contemporaneous receipts for donations.

Long story short: The states that aggressively go after taxpayers with regular and/or high non-cash contributions likely have a very high success rate.

FE

[S T]

My clients that regularly claim "large" non cash donations or over $ 250 . What I advised, is that they take pictures (not a hard thing to do these days with Digital Cameras, etc), make an itemized list of each "donation" and then take that list and use "Its Deductible" for another list giving high/lows, to arrive at the approximate value when purchased and approximate value when donated.

Obviously t/p needs a receipt - which we all know is "just a piece of paper" as it usually only has the Name of the the Group Donated to - a date- and maybe if we are lucky a signature of the attendee at the Donation site. Not much other information we might consider to be accurate.

Sandy

[Black Bart]

Long shot

how do u handle state auditor who insists upon receipts for clothing donations
several clients have been audited by state and disallowed their charitable non cash donations because they didn't have actual receipts given by the charity. fed regs state that u can maintain your own log of what was given, method of determining valuation etc. each donation was under $250 and each client had approx. 8 donations what do u think

I agree with FE that you're fighting an uphill battle because your guys never got receipts (Eight different occasions and no paper? You've both got nerve ). He's also right about tough states (AR unemployment auditors occasionally class IRS-deemed 1099 guys as W-2s). SC probably heard about its sister state's success and also wants to unravel the overvalue.

If they go by IRS rules, then 8283 ("Attach if total noncash contributions are over $500") will probably kill them all, but did anybody claim less than $250 total for everything (unlikely; bags valued under $25 are rare)? There's a paragraph (which I never noticed before) on page 19 at the bottom of that Pub. 526 under "Deductions of Less Than $250" which states "You are not required to have a receipt where it is impractical to get one (for example, if you leave property at a charity's unattended drop site)." This rule isn't mentioned in the $500 and over section, but IF this was the case (don't know how you'd prove it), IF the state believed they did so (and followed IRS rules), and IF any client wanted to go to the trouble (tax on $250's not much), then they could write up their log now (non-contemporaneously), I think.

Here's the Salvation Army valuation guide (rummage sale prices) to use; also might ought to show it to the boys for next time: http://satruck.org/donation-value-guide. Good luck!

[AZ-Tax]

I always felt there may be a come to the middle solution

Couple years ago I ran this idea passed a CPA, EA & EA. The idea is the taxpayer gives their name, phone, email address and physical address to the Salvation Army, Goodwill etc. when they donate non cash items. The Salvation Army, Goodwill, etc. determine the values based on their valuations. Then emails their valuation personalized with the donors/taxpayers name and address. If you are dropping off a bag, include your name, phone, email and address in the bag. Most taxpayers just see tracking their non cash donations as just another hassle you know like balancing their check books etc. except you can't cheat in balancing your checkbook. I understand that would generate additional cost for the non-profit but with the Goodwill President making a couple million per year in salary, they can afford it. The CPA, EA thought the idea would not work.

Your thoughts.

[ATSMAN]

I have a client who is active in her church outreach programs and she filled out an 8283 for around $2000. She and her daughter scout the local Craigslist and Garage sales and pick up unwanted household stuff for next to nothing and then donate to the Church which in turn gives it to homeless people and needy families.

Last year I think she picked up 10 TV sets for little money, or free.

She keeps a detailed list of items where picked up, when and photos. They use the salvation army guide for valuation.

I cautioned her that if there is a pattern of 8283 with high amounts, she will be audited.

[MDEA]

Donations

You can not deduct more than what you paid for the item.If the cost is lower you have a profit.I would not allow more than the purchase price for a donation.

[Uncle Sam]

Non Cash Donations

Each year - various clients come in to show me their clothing donations.
They have written an itemized list of what they donated along with their reasonable FMV.
Salvation Army does stamp it, but Goodwill doesn't and gives a register tape that gives the
donation date, taxpayer name, and "7 bags".
So how reliable can these charitable receipts be if the donees don't bother keeping acurate
records?

[mastertaxguy]

several clients have been audited by state and disallowed their charitable non cash donations because they didn't have actual receipts given by the charity. fed regs state that u can maintain your own log of what was given, method of determining valuation etc. each donation was under $250 and each client had approx. 8 donations what do u think

What do I thinK? I don't handle the state auditor. The issue you raise is really who should handle the auditor. Unless you created values for the items, it is taxpayer responsibility, not yours. Short answer might be to advise the clients to provide the information requested. Your comment about federal requirements does not supplant what a state may require. Down the road, as a preparer you might consider how your prepare returns and what documents you really need to see.

[FEDUKE404]

Asking for audits ?

You can not deduct more than what you paid for the item.If the cost is lower you have a profit.I would not allow more than the purchase price for a donation.

Re comment by ATSMAN: "pick up unwanted household stuff for next to nothing and then donate to the Church"

You beat me to it!

...I do not think you are allowed to do that!! (Well, I guess it IS OK is you eventually claim a charitable donation in the corresponding amount of "next to nothing.")

Creative....kinda like the 8 X $250 unreceipted non-cash contributions followed by "What Form 8283 ??"

I don't like to live that dangerously, especially if my signature is on the tax return.

FE

[Kram BergGold]

More on those TV Sets

Once an item is held long term, more than 1 year, you can deduct the FMV rather than cost. Think about giving away appreciated stocks. So if the person keeps the TV sedt in the basement for more than 1 year I think it is ok to dedcut FMV. However, the FMV of a non flat screen TV can't be more than a few dollars. No one wants them.

[Snaggletooth]

South Carolina

Normally when auditors border on the ridiculous, I plan to go to their supervisor. Most likely, however, South Carolina is dictating from the Revenue Commissioner down to the worker bees to disallow anything they can, so going to the supervisor won't work anymore.

Whereas it may be noble to donate non-cash items, most of my clientele with "8 bags" of stuff are just cleaning out their house, and some of them don't give a penny to ANY other organized charity. In order to successfully defend, they must keep detailed records and have some corroborative documentation from the donee. Realistically, a donee such as Goodwill or Salvation Army is not going to go through eight bags of stuff and value each item. There are published guides (one of them is in TTB) which show values on things such as shirts, shoes, and househood items.

If your clients are like mine, they would not survive an assault from an aggressive auditor for non-cash donations. Doesn't mean that the deduction wasn't legitimate or anything else that is negative -- it only means they have an unsupported deduction.

[David1980]

Non-cash charitable contributions are pretty ridiculous on their own. Not sure I've ever had a taxpayer want to deduct a sane value for their bags of "household goods". I have had plenty want to take the "standard" amount though.