by John Anderson
Donating to charity is a common practice in the United States. With the many emerging nonprofit organizations aimed at extending a hand to impoverished communities, charity as many people are aware of does not only benefit the receiver but more so the giver.
“Your contribution is tax deductible” — Anyone who hears such words would definitely deem it a reason to celebrate. Getting a tax deduction may not be the only drive for most charitable donations, but it undeniably is a factor. According to an article from Nolo.com, a good 85 percent of the contributions to charity become possible through people who withhold their donations. Not all charitable contributions are tax deductible. The determination of whether a gift is taxable or not lies on the foundation’s status. A similar contribution may be deductible by a donor, but not by another.
To make matters more problematic, the IRS collection process has even more constricting rules on donations. An article from BackTaxesHelp.com lists down the paper works and requirements for both nonprofits and their benefactors. In certain circumstances, the new rules provide a limitation as to the amount that the donor can withhold. This has made the charitable fundraisers’ and donors’ life more challenging than it used to be.
The entitlement of a charitable institution must be recognized by the Internal Revenue Service before the latter can beseech charitable donations or gifts in the United States. In the law, small charities or churches with an annual income of less than $5,000 need not apply for tax immunity.
Organizations of charitable nature will regularly provide donors with a letter recognizing the gift or with a receipt for the donation. It is important to also keep such acknowledgment letters alongside the individual’s tax records. According to the law, in the event a tax return is audited, the IRS can prohibit charitable donations of two hundred fifty dollars or more should the individual lack the written acknowledgement from the charity that documents the gift.
Every taxpayer is mandated to retain accounts of their contributions to charity. Such records must specify the name of the charitable organization, the date the donation was made and the amount of such. Even cancelled checks serve well as a printed record, as all the information aforementioned will be documented in the check. Bank account statements presenting a gift paid through debit and credit card statements showing a gift paid via the latter also hold these identical features required of one’s records.
It is no secret that philanthropy has gone viral and its continuous spread has its fair share of benefits on the part of the donor. However, it is important to keep in mind why altruism is practiced in the first place.