For you to claim a federal income tax deduction for a charitable donation valued at $250 or more, you must obtain from the recipient of the donation a “contemporaneous written acknowledgment” letter. Failure to obtain such a letter can result in a disallowance of the deduction by the IRS.
The acknowledgment letter, which may be in the form of a thank you letter to you as the donor, should include the following information:
- the name and address of the recipient of the donation;
- the amount of a cash gift or, if not in cash, a description of the donation sufficient to identify the nature of the gift; and, if applicable
- a statement that no goods or services were provided by the recipient in return for the donation, or a description and good faith estimate of the value of any goods and services that were provided by the recipient in return for the donation.
As some donor taxpayers have discovered to their consternation, including some who have made very large donations, the timing of the receipt of the letter can be as important as its contents. The rule to bear in mind is that you must obtain the acknowledgment letter by the date of the filing of the tax return for the year in which the charitable contribution was made. You run the risk of being denied the deduction in assuming that it will suffice if the letter has been promised or will be received after the return has been filed but before you would ever hear from the IRS.
Recently, the Chief Counsel for the IRS underscored the need for having the donation acknowledgment letter in hand (or in your e mail inbox) when you file your return in order to qualify for the deduction. The federal Tax Code actually has a provision that states that the donor is not required to obtain an acknowledgment letter if the recipient organization itself files a return that meets applicable requirements and includes the required information about the gift. Nonetheless, because no implementing regulations on this law have yet been issued, the Chief Counsel determined in a memorandum that a donor cannot take this route to claim the deduction.
The takeaway lesson for donor taxpayers is to be sure that you receive your acknowledgment letters before you file, and don’t make the mistake of assuming that the IRS will cut you some slack if, for whatever reason, that deadline is missed.