Bush Implements New IRS Rules on Cash Donations to Charities

My donations are also given weekly, through the envelope system - with a check inside. It really is not difficult to do.

You are incorrect about the cumulative rule. If you give more than $250 in any calendar year to a single charity, you need a receipt for 2006. It's a pain for churches to keep the records, but they are required to keep the records if at all possible.

I think you read the new rules incorrectly, but I'll withhold judgment until I get to read the original language. One reason I doubt your interpretation is that usually we'd know by now if there were new things we'd have to start saving on January 1.

You are incorrect about the cumulative rule. If you give more than $250 in any calendar year to a single charity, you need a receipt for 2006. It's a pain for churches to keep the records, but they are required to keep the records if at all possible.

I'm correct. The rules state explicitly "In figuring whether your contribution is $250 or more, do not combine separate contributions. For example, if you gave your church $25 each week, your weekly payments do not have to be combined. Each payment is a separate contribution.[Emphasis mine]

Read pages 16-17 of Pub 526, or talk to your accountant.

I think you read the new rules incorrectly, but I'll withhold judgment until I get to read the original language. One reason I doubt your interpretation is that usually we'd know by now if there were new things we'd have to start saving on January 1.

That's why the new rules are out now; unfortunately the IRS is notoriously bad at making the public aware of changes in the tax code. This is probably because the "Big Four" have a lot of lobbying power on the Hill and don't want people doing their own taxes.

I don't know where you live but residents in states such as Texas that fund government through sales taxes (and not income taxes) were allowed in 2005 to deduct the money they spent on sales taxes. This is more fair for those of us that don't live in states with state income taxes which as you know are deductible on your 1040. Now the IRS lets you either save your receipts and deduct your actual sales taxes or you can use their tax table which is based on your AGI. As it turns out, their tax tables are bogus because they represent a substantially lower tax liability than what we see in actual cases. However, the rule regarding actual sales tax was not widely made available prior to its implementation. Who would you expect to make you aware of changes in the tax code? In an ideal world, the IRS would send out a bulletin (they have one, it's called Pub 533) to every taxpayer on Jan 1 detailing significant changes, but in reality those changes aren't widely known until 16 months later when it's too late to do anything. By the way, the state sales tax deduction has NOT been renewed by Congress so how would you even know if you should have been saving receipts?

Of course I don't expect you to believe me on any of this - I strongly encourage you to do your own investigation on tax issues or consult your accountant.

Researching the tax code is a distressing thing. It's easy enough to find some specific thing written in 1986, for example, but finding good information on how a section has been updated by dozens of bills passed since that time is difficult.

I'm beginning to think you are correct about this change, although to be honest the change is to add an item "17" to section 170 part f of the IRS code, and I'm having trouble now figuring out what items 13-16 were.

And there doesn't appear to be a removal of previous law, so I can't tell for sure whether this item 17 is restricted in any way by some new "16" they added, or if the previous rules weren't actually IN the law but were just administrative rules.

Pub 526 says what you say, but still the church is required to report to the donor a list of all contributions, even those which were under the 250 limit. But that could just mean that they didn't match up the two regulations, which isn't surprising.

I couldn't find the reference to a "250 dollar" limit in the IRS code itself anyway, maybe it's in that illusive items 13-16 that I can't get my hands on.

I used to care more, but now I just let TurboTax care for me, so I'm no longer certain my taxes are correct but at least they are easier.

It's really odd because, reading all the little changes, it now appears that if I donate a few bucks of items to Goodwill, I can get a receipt from them that merely says I donated items, and I can then valuate those items as I see fit (I'm using the Turbotax deductions software now, just because it's easier to explain if I get audited).

But if I gave them a 10-dollar bill, I might have to have them write down the money I gave.

But in fact, the new law's text does not say that the receipt has to list the value of the item, so I guess next year the Salvation Army could simply have a tear-off sheet of "thanks for your donation" coupons they would give out to people who threw money in.

As I've now accepted you as an expert for the purpose of this discussion, do you have a different take on the wording of the section in question? Do you see any reason why the receipt for cash has to list the amount of the cash?

Researching the tax code is a distressing thing.

That's the truest statement anyone could make about the US tax code.

I used to care more, but now I just let TurboTax care for me, so I'm no longer certain my taxes are correct but at least they are easier.

That's the weirdest thing about taxes - there are many ways for them to be "correct." If you go to 10 different accountants with the exact same information, you'll get 10 different returns - all of them "correct." I follow two rules for tax preparation:

1. There is no such thing as right or wrong - there is defendable and non defendable.
2. Pigs get fed, hogs get slaughtered.

It's really odd because, reading all the little changes, it now appears that if I donate a few bucks of items to Goodwill, I can get a receipt from them that merely says I donated items, and I can then valuate those items as I see fit (I'm using the Turbotax deductions software now, just because it's easier to explain if I get audited).
But if I gave them a 10-dollar bill, I might have to have them write down the money I gave.

You are exactly correct. Basically the new law creates a weird double standard where the IRS trusts that you will assign a correct value to goods donated but doesn't trust you when you say you put a dollar in the hat.

As I've now accepted you as an expert for the purpose of this discussion, do you have a different take on the wording of the section in question? Do you see any reason why the receipt for cash has to list the amount of the cash?

My simple answer is that it has to list the amount of cash because my accountant says it has to. Once again, the most frustrating thing about the US tax code is that there are many ways to interpret it and many ways to be right (rule #1, above). Another side effect is that it makes it VERY difficult to know exactly how much you pay in income taxes every year. If people really saw how much they paid in taxes, the Dems wouldn't have taken back Congress. Bush has given us an AWESOME deal when you really look at the numbers. For reasons I can't understand, this ridiculous law has passed but it definately hasn't soured me on my tax situation. I'm frankly more concerned about the impact on small charities who are now faced with a potentially crippling administrative burden.

Anyway, I should point out that all of this ONLY comes into play IF you get audited. If your property contributions exceed $500 you'll have to file a form 8283 but you don't need any receipts and you can even define the FMV yourself. If they exceed $5000 you need an appraisal summary (part B of 8283), but you still don't have to provide receipts with your return.

The average American donates 2.2% of his income to charity. If you're a churchgoer, and you tithe, it's closer to 10%. Remember rule #2? A 5 or 10% deduction isn't going to raise any audit flags. If you're writing off 40% of your income as a charitable contribution, you better have some good documentation for the auditor.

Well, some of us go to churches that include small envelopes you fill out, place your tithe and or offering in. That way the Church can keep track of who gives what.

I undestand... such a method would help in tracking cash gifts, but not all churches use envelopes for offerings. My own church does not, and we cannot provide receipts for cash donations because we do not know who dropped the cash in the collection plate.

I suppose if I was being disobedient and not giving what I am commanded to, I would be put off by that sort of thing.

I have no idea what you meant by this part of your reply. Hope you have a nice day. :-)

Ask your accountant if you can consider a 20 dollar bill an "item" you donated with a value of "20 dollars or so" because it is in good condition.....

Ask your accountant if you can consider a 20 dollar bill an "item" you donated with a value of "20 dollars or so" because it is in good condition.....

I will ask and post here later.

Here's a brain twister. Since you can't claim a $20 cash donation without a receipt but you can claim a $20 property donation, here's what you do:
go into a Goodwill, buy something for $20, then go around to the back and donate it. Now you can make a $20 deduction without any receipts.

But don't you still need a generic receipt from Goodwill showing you donated something? I know it's not as onerous as getting a receipt for cash with an amount, but it is a receipt. Or can you donate some small amounts of goods without any record?

This is just one more example of why we need a low flat tax.

I have to apologize to you guys [& gals] I was having a crazy day yesterday and was very rude with many of you. I'm sorry about that.

Does that mean you're retracting your marriage proposal? :-(

I appreciate your apology and the e-mail you sent me. I'm glad to hear you are seeking psychiatric help for your mental condition and I'm praying for you!

-JB

But don't you still need a generic receipt from Goodwill showing you donated something? I know it's not as onerous as getting a receipt for cash with an amount, but it is a receipt. Or can you donate some small amounts of goods without any record?

Here's where the new rule doesn't make any sense. For noncash contributions (like clothes dropped off at the Goodwill), you are supposed to get a receipt even if the total value is under $250. However, Pub 526 also contains a provision that says

"You are not required to have a receipt where it is impractical to get one (for example, if you leave property at a charity’s unattended drop site)."

Hence the problem with the new rule - if it's impractical to get a receipt then it's ok for noncash contributions but NOT ok for cash ones. Doesn't make any sense, especially from the "we want to cut down on fraud" angle which is completely asinine.

As an aside, if you live in a non income tax state and enjoyed your sales tax writeoff last year you might get screwed this year. Congress has not renewed the rule thus far and with the Dems taking over I don't know what the chances of it happening in January are.

Now that's a complete screwing of all citizens of Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. It was a $2,100 exception for me last year which I'm going to lose simply because I live in the wrong state.

Go away hater.