Substantiating Charitable Gifts-Specimen Letter To Client-Donors

 Now is the time! Conrad Teitell outlines what donors and/or clients need to know and do to substantiate their charitable gifts in 2014 on their federal income tax return. Take a look. Remember this is not intended as legal or tax advice so please check with your advisor(s) on how the rules apply to you.

Substantiating Charitable Gifts-Specimen Letter To Client-Donors

WealthManagement.com

By: Conrad Teitell

December 29, 2014

Now is a good time to tell your clients how to substantiate their charitable gifts on their 2014 federal income tax returns – due by April 15, 2015.

Strict, detailed and overlapping substantiation requirements must be met for charitable deductions to be allowed. And generally there is no second chance if deadlines are missed or requirements aren’t satisfied.

Alert. The IRS points out in IRS Publication 557 (October 2013)  -Tax Exempt Status for Your Organization that: “The donor is responsible for requesting and obtaining the written acknowledgment from the donee.”

Crucial. When a receipt is required to substantiate a deduction, a donor must have it in his or her possession by the earlier of the actual filing of the return, or the April 15, 2015 due date (or extended due date) for the return. It’s wise to alert and inform donors about the substantiation requirements before the end of 2014. Otherwise, a speedy filer may lose the deduction because the return is filed before receiving a receipt from the donee. For example, the donor files her return on January 7, 2015, but doesn’t get the receipt until January 12.

Help is here. The following specimen letter informs client-donors of the reporting requirements and deadlines. You have my permission to adopt (or adapt) the letter.

Dear [clients]:

The federal government encourages your generosity by allowing you to deduct your gifts to charities on your income tax return if you itemize. However, you must follow the IRS’s reporting and substantiation rules to assure your charitable deduction. I hope that this letter highlighting the IRS’s requirements will be helpful to you when preparing your federal income tax return for the year 2014 (due by April 15, 2015). The rules are numerous – and overlapping. This letter tells about: (1) reporting requirements for noncash charitable contributions; (2) rules for hard-to-value property; and (3) receipts you need to substantiate cash and noncash contributions.

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