Newswise — Mailboxes are crammed with requests for donations, representatives of charities huddle on street corners and at the malls, and that holiday spirit of goodwill — and a quest for last-minute tax deductions — has lots of people eager to donate to organizations near and far.
That's great news, said Margaret Van Brunt, assistant dean of the Rohrer College of Business at Rowan University, Glassboro, N.J..
Actually, that's great news with a qualification, according to Van Brunt, a certified public accountant and coordinator of the Volunteer Income Tax Assistance Program at Rowan University.
Effective for 2007, the IRS has issued new rules (and has existing ones) that donors need to be aware of as they search for a few dollars to drop in a kettle or drop off a bag of clothes and household goods at a nearby center.
Under the new 2007 rules, donations will not be deductible unless they are substantiated by a bank record, credit card statement or written receipt from a charity.
"That means you're going to want to write a check for these donations or ask for a written receipt," Van Brunt said. "The IRS is really going to be taking a close look at this as it cracks down on suspected abuse."
For those who donate items as opposed to money, Van Brunt said the IRS requires the items be in "good condition" and of meaningful use in order to be considered deductible, and deductions should represent the fair market value of the donations, not the original price.
The new rules also impact those who donate through payroll deduction. Those donors need to remember to save their pay stubs, W-2 or other documents that show total donations and their pledge cards indicating the names of the charities.
As a tax professional, how to approach donations is a no-brainer for Van Brunt, who isn't making any changes to her patterns this year. "I've always made donations by check or asked for a receipt," said the Rowan assistant dean, who also makes many of her contributions via an easy recordkeeping process — using online banking. She recommends that people who donate to charities on a regular basis use online banking to make the process easy — no last-minute grabs for a checkbook — and easy to track.
Van Brunt said a good resource for donors is IRS Publication 526, Charitable Contributions, found on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
"It will be interesting to see how these new rules will impact charities that rely on on-the-street fundraising this holiday season," she said. And, when in doubt, she added, "Remember substantiation is the key."
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