Non Cash Donations

[S T]

Curious as to how everyone is handling the client that submits large amounts for non cash charitable donations?

Client will provide the receipts, records, etc, but income of $88,000 and charitable donation of $3,500 or greater for donated items, seems a target area.

Sandy

[fliszt]

I've only

had one client that did that. Her income though was close to $100. But every year she would bring in donation names, donated address. I just questioned her with very serious questions and looked her straight in the eye. She never flenched and said everything was correct. I warned her of consequences and then went ahead and filed her return. My disclaimer cover letter also covers whos responsibility it is for the accuracy of the return.
Eventually, I caught her in a non-truth and dropped her as a client.
Larry

[Zee]

Curious as to how everyone is handling the client that submits large amounts for non cash charitable donations?

Client will provide the receipts, records, etc, but income of $88,000 and charitable donation of $3,500 or greater for donated items, seems a target area.

Sandy

If the client provides receipts, records, etc., it isn't the responsibility of the preparer to audit the records for authenticity. The IRS doesn't pay us to do that, or assume that role. Some ancillary programs provide averages, or averages are part of the software. Doesn't TurboTax have an audit meter? That's one benefit of such information. However, I wouldn't want to have to wait until the return is done and the audit meter or other information shows a high risk, and then have the client change their mind on the amounts. Some people might be scared even though it's legitimate.

[Jesse]

Curious as to how everyone is handling the client that submits large amounts for non cash charitable donations?

Client will provide the receipts, records, etc, but income of $88,000 and charitable donation of $3,500 or greater for donated items, seems a target area.

Sandy

Anything over $500 I've been asking to see documentation and then make a copy for my records. Sure have a lot of them, even the lower income that clean out the closet and go by some of - at least I think - inflated value guides. I explain the rules and I think that's the best I can do.

[DTS]

Receipts

Anything over $500 I've been asking to see documentation and then make a copy for my records. Sure have a lot of them, even the lower income that clean out the closet and go by some of - at least I think - inflated value guides. I explain the rules and I think that's the best I can do.

I have not been asking my clients to show me receipts for all the donations, just been firm in explaining the situation now. All have been assuring me they have them and what was donated on the day.

I hope this is enough. As was stated, it's not our job to verify all this, I hope this turns out to be so.

Dennis

[taxxcpa]

Non-cash donations

My wife spends a fortune buying clothes and always has large non-cash donations. I argue with her about the amount she says they are worth and sometimes get her to reduce the amount she claims. The IRS has never questioned us.

I've had a few very large claims by clients supported by appraisals.

None have ever been audited for non-cash contributions to my knowledge.

[S T]

Audit

In my 25+ years I have had only one audit on the non-cash donations and I won with a no change, but that was at least 15 years ago.

I don't like the sound of the new rules, and yet clients still insist on claiming high deductions for non-cash donations. I have been furnishing the rules, giving them the websites for the Salvation Army and It's Deductible. But still very high values are being presented.

I know it is not our job, but these are long time clients and it is always the same clients that I have this same issue with every year!

Finally as of 6PM tonight one turned the corner, and thought better of his almost $3,500 deduction and decreased it. You know this is the client that always has $600, $500, $1000, on their worksheets.

Thanks for sharing!

Sandy

[Larmil]

Two possibilities

My wife spends a fortune buying clothes and always has large non-cash donations. I argue with her about the amount she says they are worth and sometimes get her to reduce the amount she claims. The IRS has never questioned us.

I've had a few very large claims by clients supported by appraisals.

None have ever been audited for non-cash contributions to my knowledge.

I have had some clients with large non-cash donations. Sometimes it is a case of buying 'the best' and not wanting the clothes, furniture etc. once they are 'used' or not in fashion.

Other clients have inherited expensive clothing or household goods and donated them.

[Burke]

People always think their furniture, clothes, etc are worth more than they are, until they try to sell them at a yard sale. I have always required the receipts for non-cash donations, as you need the detail of to whom, what, when, cost, etc for the 8283. I am now asking for detail on the cash contributions as well, at least amt and to what organization it is donated. Most gave it to me anyway in prior years, some just put a total down.

[S T]

I have been

I have been asking all along, I just have these handful of clients (like 6 -10) of them every year that make me really want to question. I know that I am not the person to "police" this issue, but I am preparing the return, so in good conscious need to discuss with the client and alert them to some of the potential audit areas.

As the new rules are passed, my non-cash are diminishing thank goodness! Most clients are saying forget it, not worth the trouble to keep records, but still have those few that always pull the $$ from the ceiling and hope that you will fall for it and place it on the tax return!

Those particular clients always seem to come up with amounts greater than $3,000, and as much as $8,000 or $9,000 on non cash donations (not any one single item, combination of giving). Makes me wonder!

So what I am doing in preparation of 2008 deductions is supplying these clients with a list such as from the Salvation Army, CFS print out or giving them the link to "Its Deductible.Com" ( I am not sure about this site, the values seem high) for them to complete with each and every donation date, and also suggestng that they take pictures before they "bundle it all up".

So maybe in 2008, I won't just be given a number that is "pulled" from the sky somewhere! And in reality the client and I have a record!

Thanks for sharing!

Sandy

[erchess]

My two cents

Most bring me the receipts but I always ask for them and I require a picture or a written appraisal before I will go above the standard guides that we all use like the Salvation Army, CFS Tax Tools, and Its Deductible. I am kind of flexible on the guide if they've got something that seems reasonable. I have rarely had anyone bring me a guide and no one has brought a picture or an appraisal.

What is reasonable though really does depend on the situation. There is a very high end Men's Clothing store in Asheville NC where salesmen work in suits they purchase at or below wholesale from the store. You may not wear a suit or tie to work after it has been cleaned or pressed and both the owner and most of the salespeople dry clean and donate their suits after a week or two of daily wear. I do not know how they value the donations for tax purposes but it's obvious that these folks have higher than normal noncash contributions.

[Zee]

It's Deductible - Guaranty

In their literature, It's Deductible used to claim the visited thrift shops throughout the country to establish their dollar amounts, and you could also purchase (for an extra charge) an audit representation guaranty including the values. I would agree they seem awfully high. I don't know if Intuit (after purchasing this software) offers this guaranty, or how they obtain their prices but they do indicate they are researched.

On the other hand, if you visit a Salvation Army Store, you'll find their selling pricing aren't always cheap and may approach the values used in the listings. I've only visited a couple of times for odds & ends, pictures, etc. The pricing was higher than I expected.

If It's Deductible still sells a guaranty, maybe after reviewing the list,if you think the values are too high perhaps you should simply recommend they purchase a guaranty because the prices look inflated if it's still available.

[fliszt]

Larmil, do your

clients take a deduction for items they inherited? Isn't inherited items mostly received at $0.00 ? So then the cost is zero? Just wondering.
Larry

[Larmil]

clients take a deduction for items they inherited? Isn't inherited items mostly received at $0.00 ? So then the cost is zero? Just wondering.
Larry

Correct me if I am wrong. Inherited items have a stepped up basis - the value at the time of death.

[FEDUKE404]

Inflated donation values

[snipped] You may not wear a suit or tie to work after it has been cleaned or pressed and both the owner and most of the salespeople dry clean and donate their suits after a week or two of daily wear. I do not know how they value the donations for tax purposes but it's obvious that these folks have higher than normal noncash contributions.

Perhaps so, but that $800 suit still has a FMV of maybe $40 at the GoodWill Store. I have several clients that "only buy expensive stuff" also.

Since you are in NC, it's worth noting that the NCDOR has in recent years been auditing a lot of returns with large amounts of non-cash contributions, even though the IRS let them slide. And that was before the recent tightening of the contributions rules.

Not unlike "Why did you rob banks" - "'Cause that's where the money is!"

FE