For Mark Roberts’ Use: December has arrived, and with it we receive holiday cheer, crowded shopping malls, sparkling decorations everywhere we look, and fake charity scams.
Wait, what? Yes, you unfortunately read that correctly. While most of us are feeling joyful and generous, a few unscrupulous sorts are feeling greedy and manipulative. And if we aren’t careful, they will take advantage of our goodwill and festive spirits.
Giving to charity feels great, but can also earn you a valuable income tax deduction. The problem is, you won’t receive credit for accidentally giving money to a fake charity, and you also can’t claim the deduction if you don’t follow IRS guidelines carefully.
Check to ensure the charity is real, and qualified by the IRS. Before giving any money to anyone, use the IRS website to search for the name of the charity. Some fake charities have names that are convincingly similar to the real ones with which you are familiar.
Ask for a receipt. If you pay with cash or donate household items, ask for a receipt to use as proof of your donation. If you make a payment with credit or debit card, the account statement will suffice as your documentation.
Store proof of deductions in a safe place. Paper copies are vulnerable to damage and loss. Instead, keep digital copies. If your return is ever audited and you don’t have proof of your donations, you will lose the deduction and possibly owe additional money to the IRS.
Value your charitable contributions correctly. Household goods are only valued at their current fair market value, not their original purchase price. Of course, if you donate antiques that have appreciated in value, you can certainly claim that amount. Just keep a copy of an appraisal.
If you receive anything in return for a cash donation, you are required to deduct the value of that item from the total amount of your contribution. For example, if you bid 1,000 dollars on a weekend trip at a charity auction, and the trip is valued at 500 dollars, you can only claim a 500-dollar charitable contributions deduction.
Ask for professional advice. As with any other complicated tax issue, ask your tax professional for guidance before filing your return. This is the best way to ensure that you’re claiming deductions correctly, and you’re much less likely to encounter problems in the event of an audit.