Charities feel impact of stiffer IRS rules on donations

January 21, 2008|By TIFFANY ARNOLD

It's better to give than receive, but people hoping to deduct charitable donations on their taxes will need proof of their philanthropy.

"You can't just say, 'Poor box at church, $20,' you better have documentation," said Catharine Fairley, a certified public accountant at Draper & McGinley, an accounting firm with offices in Hagerstown and Frederick, Md.

This tax season, charitable donors have more to consider. The IRS has changed the rules for cash contributions and things people typically donate to thrift stores. The IRS wants to make it harder for donors to exaggerate their generosity.

Under the new guidelines, taxpayers cannot deduct cash contributions ? regardless of amount ? unless there is a bank record or something the charity issued in writing, said Jim Dupree, IRS spokesman for Maryland.


Bank records include canceled checks, a bank copy of a canceled check, or a bank statement containing the name of the charity, the date and the amount, Dupree said.

There also is a new wrinkle in clothing and household item donations made after Aug. 17, 2006: You can't claim these things unless they are in "good used condition or better," according to federal tax documents.

"If you're giving it to a thrift shop, it can't be something they'd tear up for rags," Fairley said.

The IRS also requires donors to value their items. Fairley is prodding her clients to itemize the things they're donating. "Don't just put down 'five bags of clothes, $499,'" she said. "List what's in the bag."

Local charitable organizations have been feeling the impact of the new rules. Jennifer Davis Mallow, director of business development and marketing for Horizon Goodwill Industries, said that as a result of the new tax rules, more people have been requesting receipts.

"It hasn't been much more than past years, but I'm betting we'll have a whole lot more when it gets closer to tax time," Mallow said. "Probably as more people go to do their taxes and realize they needed them."

In 2007, there were 46,546 Hagerstown donors, Mallow said. Horizon Goodwill has 11 stores in Maryland, West Virginia, Virginia and Pennsylvania. Donations from those four states generated nearly $6 million in revenue for Goodwill, Mallow said.

The Salvation Army in Hagerstown hasn't seen a jump in receipt requests, but a recent tax law changing the way auto donations are valued has undermined car donations, said Maj. Robert Lyle, commander of The Salvation Army in Washington County.

"We've seen those decline," Lyle said. "Before, you used to get the Blue Book value for it, but now you get whatever we sell it for. So if it's worth $1,200 and we only get $600 for it, you only get $600."

According to federal documents, the IRS processed nearly 135 million income tax returns for 2006. The IRS recently reported to Congress that more than one million taxpayers might have missed out on deductions for 2006 because they did not know they were entitled to them.

Keep good records for a less taxing tax season

Though new guidelines for cash donations to charity require some form of proof, in most cases, the IRS does not require you to keep records. But the IRS suggests you hang on to them, should you get audited. These are things the IRS recommends taxpayers keep:

· Bills

· Credit card and other receipts

· Invoices

· Mileage logs

· Canceled, imaged or substitute checks, or any other proof of payment

· Any other records to support deductions or credits you claim on your return

? Source: Internal Revenue Service online,

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