December is a great time of the year for your company to make a donation to a nonprofit in need or a charity of your choice. Not only will your company get a tax write-off; your employees will also share your spirit of kindness and generosity.
It’s always a good idea to familiarize yourself with IRS guidelines for year-end gifts to charity. Here are the highlights that apply to individuals and businesses:
Clothing and Household Items: At this time of the year, many companies hold coat drives and/or organized efforts to give to nonprofits. According to the IRS, clothing and household items donated to charity generally must be in good used condition, or better, to be tax-deductible. If you claim a deduction of over $500, it does not matter what kind of condition the goods are in, as long as you include a qualified appraisal of the items with your tax return.
Donors must get a written acknowledgement from the charity for anything worth $250 or more, with a description of the items contributed.
Monetary Donations: The IRS is very specific about cash contributions with regard to bank records and payroll deductions. The most important requirement is to obtain an acknowledgment from a charity for each deductible donation – money or property – of $250 or more.
- A taxpayer must have a bank record or a written statement from the charity to deduct any donation of money, regardless of the amount. The record must show the name of the charity, and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union and credit card statements. Bank or credit union statements should show the name of the charity, the date and the amount paid. Credit card statements should show the name of the charity, the date and the transaction posting date.
- Donations of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or another document furnished by the employer, showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
Beware of Scams
This may be a charitable time of the year, but it’s also the time of the year to watch out for scams. You may, for example, get a phone call or email from a charity that appears to be legitimate, yet may not be. The best advice I can give is to thoroughly check out every charity before you contribute. For example, ask the caller for the phone number and call the charity back to ensure it actually exists. If the caller refuses to give you a phone number, then you probably will know that there is something not right about the call.
If you have a specific question on charitable donations or other bookkeeping matters, call us at Sound Business Services for advice. We’re here to help!