Donation Receipt

[S T]

This is interesting --- a client on behalf of her daughter just forwarded to me a donation receipt from the VFW - for $ 9,500 dated Nov 9, 2015 for 2015 tax year.

Apparently the daughter donates time in cleaning the facilities and the VFW has determined for year 2015 her services are valued at $ 9,500.

My thought is that in January 2016 for year 2015, she will also receive a 1099 MISC for Box 7 for $9,500 -

If this scenario would be factual, She would have to file a schedule C for the $ 9,500 as income, she would be allowed any deductions for cleaning supplies, and possible auto mileage - presuming records were kept, etc

Then a Schedule A filed for the $ 9,500 donation receipt -

However, that would still leave a SE amount due - which possibly could be offset by EITC.

Not anticipated by the daughter and I have not prepared the daughter' return in the past -I am thinking I need more info from the daughter's income for 2015 - before any determination.

The donation receipt just seems odd to me from VFW without the VFW facility also recording income that has not been issued yet as 2015 year has not closed.

Any thoughts on this!

Sandy

[Uncle Sam]

Donation Receipt

VFW is NOT a 501(c)(3) entity where one can take donation deductions for contributions of any kind.
Donation of services is not a donative transaction.
Only if one laid out out-of-pocket money unreimbursed could it be claimed legitimately as a donaton.

VFW could possibly lose its exemption for issuing a form incorrectly for such a sizable amount.
They would need to check their by-laws to see if it's permissable. I highly doubt it.

[FEDUKE404]

Creating a deduction

I would not touch this one with a 20-foot pole.

Somewhere in my cloudy past I remember an underlying tax principle: "Donation of services is never deductible."

I don't see any way that "donation" of $9,500 would ever (legitimately) fly on Schedule A.

As for that forthcoming Form 1099-MISC, I would not hold my breath on that one appearing.

On further consideration, I guess it does open up some potential doors for the EITC followers?

FE

[JohnH]

I agree - this one could be messy. VFW is not a 501(c)(3), although there is a "VFW Foundation", which apparently is. There's ample room in that fact alone to create confusion. I've had some limited interactions with VFW local chapters trying to figure out what to do with Form 990, and my experience was that the volunteers handling the paperwork were often very confused about tax matters as related to their organization.

It would not surprise me if the original letter was issued simply because the issuer thought the value of one's time is tax deductible if it's given for any non-profit organization. Most of us have heard that line of reasoning before in various ways and forms. They mean well, but it's sometimes hard to convince them they are wrong.

[Roland Slugg]

Let me make several points about this:

(1) The "receipt" your client's daughter received may or may not be an official receipt/acknowledgment from the VFW Post where she volunteered ... i.e a receipt intended to serve as proof of a tax-deductible contribution. It may really be just a "thank you" letter from the organization, expressing appreciation for her services and stating an estimated value of those services.

(2) I believe it is unlikely that the daughter will receive a 1099-MISC from the VFW Post where she "worked," and I don't believe she should. IMO it is not only pointless but improper for a charitable organization to "create" both income and a possible tax deduction in this manner. It might be prudent for the daughter to contact the Post's bookkeeper and ask if a 1099-MISC will be issued. I hope the answer is "No." The only legitimate reason why a 1099-MISC might be issued is if the daughter actually was paid for her services and then donated all the payments back to the VFW Post.

(3) If this is what actually happened, then she will (or should) receive a 1099-MISC in January, although it's also possible she will receive a W-2 instead. (Payment via W-2 wages presents an additional problem, because of the taxes withheld, reducing the amount of the contribution.) If she does get a 1099-MISC (or a W-2) in January 2016, she should report the income on her tax return and would then be eligible to take a tax deduction for the $9,500 (or other amount) contributed.

(4) Donations to VFW Posts or the parent organization are tax deductible. The VFW and its many Posts are 501(c)(19) organizations ... as long as they jumped through all the application hoops ... and as such they are "30% charities." Therefore, contributions thereto are limited to 30% of the taxpayer's "contribution base," generally AGI. (Code §170(b)(1)(B) and Regs §1.170A-8(c))

[Uncle Sam]

Donation Receipt

Roland- I believe you're reading more into this and creating a defense where it doesn't exist.
Donation of time (services) is not deductible, no matter what type of organization it is.
You know as well as the rest of us - that it's either cash or property that is counted for charitable donations.
And even if made to a foundation - donation of services is not tax deductible.

[S T]

Here is the verbage from Veterans of Foreign Wars of the U S of America, Post ###, and signed by the Commander of that VFW Post

"thank you for donation to the Veterans of Foreign Wars Post ###. Your donation of $ 9,500 to the post will go a long way in helping with our building. Enclosed you will find our nonprofit number (noted on the VFW letterhead)"

I find it odd that they would issue a donation statement, for services - I do know and understand those rules.

I am going to suggest to the daughter that she contact them to see if they are issuing a 1099 Misc form or not for year 2015. I also find it odd that the VFW is issuing a donation statement in November 2015, unless the daughter is no longer providing services.

This was an inquiry from the taxpayer and wondering what implications for taxes there are for year 2015.

thanks for all of the posts

Sandy

[TaxGuyBill]

I don't prepare non-profit returns, but I believe that in many cases the Fair Market Value of donated services are required for the non-profit's financial accounting. I suspect that is the reason for this receipt.

[taxea]

In order for her to deduct anything they must be registered with the IRS as a non-profit. If she does not have a cleaning business she can only deduct the cleaning supplies as a donation. Her labor is not deductible. If they do send a 1099misc that would not be proper.
If they are not a non-profit she has no deductions. No Sch C if they did not pay her and no expenses on Sch C or Sch A.

[S T]

Here is an explanation from the client's Mother "Michelle volunteered her services (with her cleaning company). They presented all three workers with contribution letters, she was given one for $9500.00. So she should get what form to fill out, since this is not for trade nor was she paid by them. She just received this a few days ago and it was a group of people that donated the money, but did it under her name. She asked who did this and they all stood up. She was overwhelmed and just needed some advise on how to do this deduction when she claims her taxes next year."

Now I am really confused

Sandy

[David1980]

"Michelle volunteered her services"

As far as services, see "Value of Time or Services" in publication 526. https://www.irs.gov/publications/p52...link1000229698

"it was a group of people that donated the money, but did it under her name."

Now we're talking about a cash donation? You have the contribution letter? Does it indicate that cash was donated of $9,500 or services or some combination? Seems like a mixed signal there - is it for a donation of services, or is it for a donation of cash.

[S T]

I have the contribution letter

As stated in prior post here is the verbage "thank you for donation to the Veterans of Foreign Wars Post ###. Your donation of $9,500 to the post will go a long way in helping with our building. Enclosed you will find our nonprofit number (noted on the VFW letterhead)"

No note on services or cash donation

A lot of MIXED signals on this

Sandy

[FEDUKE404]

Possibly no donation at all?

I simply cannot understand the logic. . .or lack thereof. . .that is occurring here.

For Michelle, it would appear at best that she has no VFW income for her cleaning service and no personal deductions for her charitable work except for some possible consideration of allocated (NON Schedule C) direct VFW expenses. That could be tough to determine. This assumes Michelle is actually filing a Schedule C and Form SE (you did mention she has "three workers"). IF that is correct, then you have to rationalize she is giving about ~$800/month of "free" services from her business? ? ?

As for the $$$ donors, I'm not sure if making a gift "in someone else's name" properly constitutes a true gift by that honored individual. If anything, the folks who forked over the actual funds to the VFW would have the allowable tax deduction. This also assumes the money was documented by the VFW, not a "gift in kind," nor something that would have to be reduced for value received (like a Friday night fish fry).

If I'm reading your explanation properly, you are stating that at least $10k of cash was actually donated to the VFW, supposedly for "cleaning services," by individuals other than Michelle? From afar, it might appear the VFW folks who are generating the donation receipts might have some issues of their own to resolve.

FE

[Kram BergGold]

No Deduction and No Inocme

We have already established that the donation of services does not give rise to a charitable contribution.
Michelle has no proof that she paid the VFW $9,500 via check, credit card or cash, so again nothing to deduct.
If Michelle, volunteered her services to the VFW she does not get a 1099, she was not paid for services rendered.
Not to mention that the VFW does not qualify to begin with.

[taxea]

no matter what the letter places the donation value at the IRS dictates what of that is deductible. The donations made by others were made in her name??? Labor is not deductible, materials to do the cleaning is to the non-profit.