Donation Receipt

[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))

[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.

[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

[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.

[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