Sharing your estate with charity by making donations during your life provides many benefits: You help your favorite organizations, reduce your taxable estate, and if handled properly, reduce your income tax bill, as well.
However, if you don’t meet IRS substantiation requirements for a donation, the IRS could deny the corresponding deduction you’re claiming. To comply, generally you must obtain a “contemporaneous” written acknowledgment from the charity stating the amount of the donation, whether you received any goods or services in consideration for the donation, and the value of any such goods or services.
There is still time to receive substantiation for all of your 2015 donations: “Contemporaneous” means the earlier of 1) the date you file your tax return, or 2) the extended due date of your return. So as long as you haven’t filed your 2015 return, you can contact the charity and request a written acknowledgment — you’ll just need to wait to file your return until you receive it. (But don’t miss your filing deadline; consider filing for an extension if needed.)
Whether making charitable gifts during your life or charitable bequests at death, following IRS rules is critical. Certain types of donations may be subject to additional substantiation requirements. To learn what requirements apply to your donations, please contact me at firstname.lastname@example.org or your Berdon advisor.
Scott T. Ditman, a tax partner and Chair, Personal Wealth Services at Berdon LLP, advises high net worth individuals and family/owner-managed business clients on building, preserving, and transferring wealth, estate and income tax issues, and succession and financial planning.