September 22, 2011Many taxpayers enjoy giving back to the community by donating cash or goods to their favorite charitable organizations. In addition to the warm and fuzzy feeling you get from helping others, you may also be able to take a deduction for the donation on your 2011 tax return. But before you start tallying up your good deeds, take a look at the top nine things the IRS wants every taxpayer to know before deducting charitable donations:Make sure the organization qualifies. Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization, or check IRS Publication 78, Cumulative List of Organizations. It is available at www.IRS.gov.Itemize! Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.What is deductible? You are generally able to deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.What if you receive something in return? If your contribution entitles you to receive merchandise, goods, or services in return—such as admission to a charity banquet or sporting event—you can deduct only the amount that exceeds the fair market value of the benefit received.Keep good records. Record keeping is very important, regardless of the amount of the contribution you make. For any cash contribution, you must maintain a record of the contribution, such as a cancelled check, bank or credit card statement, payroll deduction record or a written statement from the charity. These records should include the name of the organization, and date and amount of the contribution.Pledges vs. payments. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September, but paid the charity only $200 by Dec. 31, you can only deduct $200.Year-End Donations. Include credit card charges and payments by check in the year you give them to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.Large donations. For any contribution of $250 or more, you must have a written acknowledgment from the organization. It must include the cash contribution amount and indicate whether the organization provided any goods or services in exchange for the gift. If you donated property, the acknowledgment must include a description of the items and a good faith estimate of its value. For items valued at $500 or more, you must complete a Form 8283, Noncash Charitable Contributions, and attach the form to your tax return. If you claim a deduction for a contribution of noncash property worth more than $5,000, you generally must obtain an appraisal and complete Section B of Form 8283 with your return.Tax Exemption Revocation. Approximately 275,000 organizations automatically lost their tax-exempt status recently because they did not file annual reports for three consecutive years, as required by law. Donations made prior to an organization’s automatic revocation remain tax-deductible. Going forward, however, organizations that are on the auto-revocation list that do not receive reinstatement are no longer eligible to receive tax-deductible contributions.To learn more about making deductions for charitable contributions visit www.IRS.gov.
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The April 15 filing deadline is rapidly approaching, so we encourage you to send us your tax documentation as soon as possible to expedite the filing process. Here are four important reasons why you should file your return sooner rather than later:
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