No receipts or documentation for charitable donations

[kamckinley]

Hi All,

I have a PIA client that I fight with every year regarding donation receipts. I thought I had him trained after last year, but I just received his tax info and he has the following donations with no receipts or documentation of any kind:

$600 of cash (plate) donations to church
$240 of cash donations for "jeans day" at work
$2,091 of non-cash donations (no details on what was donated, not even a blank receipt that you would get from DAV, Goodwill, etc..)

If I'm reading the substantiation requirements correctly he's out of luck on the cash donations, correct? You have to at least have a cancelled check or bank statement if no letter from the organization, so cash deposited in the collection plate at church doesn't count, same with cash donations for jeans day.

What about the non-cash donations? If he can provide details (date of contribution, name of the charity, description of items donated, etc.), will that suffice for the $2,091 of goods donated? Or does he have to have at least the blank receipt provided by Goodwill and similar charities (I don't even know who he donated these items to).

Knowing that this is a pain in the *** client that's going to get fired after this tax season anyway, how would you handle this situation? Tell him the donations are a no-go and he's welcome to go elsewhere if he doesn't like it? Allow him to come up with some documentation for the non-cash donations?

Any advice is appreciated. Thanks,
Kristine

[Corduroy Frog]

The Worst of it

All the cash, non-documented donations are bad (at best).

I guess I would start with the worst of the offenses. He is claiming over $2000 in non-cash donations. If you check
your reporting requirements, this MUST be accompanied by special form 8283 which requires descriptions, dates of
purchase, appraisal methods, etc. You can tell him IRS will reject any amount over $500 if it is not submitted.

My guess is he will run like a rabbit when confronted with this. As far as the rest of the cash, I would not deduct
anything for this if he has nothing for any recipients other than his own word that he paid cash.

Even if you had a church statement to support $XXX and accepted his word that he gave another $50 in cash, any
auditor would immediately disqualify the $50. All deductions (business or personal) must be corroborated by
receipts or other documents.

[taxea]

the regs require a receipt from the donee. No receipt = no deduction

[JohnH]

No, the regs do not require a receipt except in certain circumstances, and the "No receipt-no deduction" mantra is just plain wrong if it is applied across-the-board.

A canceled check from the charity is a valid receipt, provided it is a legitimate charity and any individual contribution is less than $250. If any individual contribution is $250 or more, then the canceled check is not sufficient and the donor must have a receipt for that contribution (or a year-end summary), containing the "no good or services" wording. That receipt must be in hand at the time the return is filed - it can't be obtained retroactively. Cash donations must of course be evidenced by a receipt from the charity.

As for the OP, I agree with the overall thought process on this thread. The cash contributions claimed to be thrown into the offering plate are out. The jeans are probably out. The other non-cash contributions are a big problem. I'd give the client a few Form 8283's and tell them to fill in all applicable lines, sign and date it at the bottom or in the margin, and give it back to me for my records. (I do this for any client who wants to claim more than $500 in non-cash contributions unless they use "It's Deductible" or a similar program). Then when preparing the return, I omit any non-cash contribution which doesn't contain ALL the required information. This puts the responsibility back on the client, where it belongs, and also treats those clients fairly who have legitimate contributions to report. If your client isn't willing to adhere to these simple procedures with the 8283, he needs to go somewhere else. He will find someone who will give in to his pressure - let them deal with his nonsense.

I also tell clients it's worth the effort to take pictures of the items when they are claiming large or multiple non-cash contributions, such as when they move/downsize or when they inherit personal property that they donate to a charity.

[Roberts]

For physical items over $500, I require extensive information because the return requires it.
For "cash" donations I take the clients word for it that they have it documented. Even though it says cash, they may have paid with check or even credit card. It's my job to inform them of their obligations and potential penalties, not act as the IRS agent. If someone has $250 withdrawn from their paycheck for the United Way - do you require documentation from the United Way of receiving it?

Since this is a client complaint thread of sorts: had a brand new client yell at me yesterday in front of his wife and adult child that I had completely screwed up his return. He was 71 years of age (and a practicing attorney) and had always done his own taxes until this year and was amazed that a professional could screw it up so badly that I had taken a $14,800 standard deduction when the IRS only allows $12,400. When he quieted down I asked if he was done? After several more minutes of his ranting I asked again. Then informed him of the additional age deduction that he hadn't been taking. His wife was royally upset that I had taken a deduction for 50% of their internet bill for her home business when she's spent over 4 hours determining it should be $40 more than that based upon her estimate of usage. As they were leaving I told them to not call me next year. The daughter asked if she could still return next year and I said Yes.

[TXEA]

For physical items over $500, I require extensive information because the return requires it.
For "cash" donations I take the clients word for it that they have it documented. Even though it says cash, they may have paid with check or even credit card. It's my job to inform them of their obligations and potential penalties, not act as the IRS agent. If someone has $250 withdrawn from their paycheck for the United Way - do you require documentation from the United Way of receiving it?

Since this is a client complaint thread of sorts: had a brand new client yell at me yesterday in front of his wife and adult child that I had completely screwed up his return. He was 71 years of age (and a practicing attorney) and had always done his own taxes until this year and was amazed that a professional could screw it up so badly that I had taken a $14,800 standard deduction when the IRS only allows $12,400. When he quieted down I asked if he was done? After several more minutes of his ranting I asked again. Then informed him of the additional age deduction that he hadn't been taking. His wife was royally upset that I had taken a deduction for 50% of their internet bill for her home business when she's spent over 4 hours determining it should be $40 more than that based upon her estimate of usage. As they were leaving I told them to not call me next year. The daughter asked if she could still return next year and I said Yes.

I am not so cavalier with taking the client's word for it, but your message about not being an IRS agent is well received.

As for your attorney client and wife. You have a lot more patience than I have. I would thrown them out of the office so fast, the daughter may not have asked to come back; although she does sound like a good client. I had a potential new client come in this week, and I advised him I would not prepare his return for various reasons. He was none too happy since he had to wait 2 weeks for an appointment with me (kind of understandable). He decided to argue a little over some questions I asked of him. I decided long ago to deal with the clients of my choosing. I tolerate absolutely zero attitude from a client. The minute an interview gets argumentative, I show them the door (not matter how long they have been a client). Life is too short.

Sure, I probably burn some bridges, but there are a lot of bridges to use.

As for the OP, get rid of this guy. He is not worth your time.

[kamckinley]

I am not so cavalier with taking the client's word for it, but your message about not being an IRS agent is well received.

As for your attorney client and wife. You have a lot more patience than I have. I would thrown them out of the office so fast, the daughter may not have asked to come back; although she does sound like a good client. I had a potential new client come in this week, and I advised him I would not prepare his return for various reasons. He was none too happy since he had to wait 2 weeks for an appointment with me (kind of understandable). He decided to argue a little over some questions I asked of him. I decided long ago to deal with the clients of my choosing. I tolerate absolutely zero attitude from a client. The minute an interview gets argumentative, I show them the door (not matter how long they have been a client). Life is too short.

Sure, I probably burn some bridges, but there are a lot of bridges to use.

As for the OP, get rid of this guy. He is not worth your time.

This has been a rough tax season for me so I am going through my list of clients and firing anyone who has been difficult to work with or doesn't follow my requests/recommendations once this tax season is over. You are absolutely correct, life is too short to deal with difficult people.

[taxea]

Nothing in the original post was under 600 so I only responded to what is needed for the amounts posted. The church will issue a letter and the other non-cash require receipts. I have no idea what jeans day is but the amount requires a receipt. And yes a cancelled check could be considered a receipt.

[mooretax]

Charitable donations

Publication 526, page 18

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).

Client gave $240 at "jean day" at work. We do not know if there is a charity attendant
at the desk. If client gave toys with a store receipt and there was no charity attendant at the company, client can claim the donation for the toys. We do not know to whom client gave $240? put it in the box? gave to Human Resources department?