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Military Finances 101: Documenting Your Charitable Contributions Thumbnail

Military Finances 101: Documenting Your Charitable Contributions

Taxes

Turkey Day is almost here. We know what comes after that. Charitable Giving season. Many of us make significant charitable contributions between now and the end of the year. But, like many things in military life, if the contributions aren’t documented correctly, they didn’t happen.

When Do You Document the Contributions?

To begin with, your documentation has to be contemporaneous (that’s the word the IRS uses). That means you can’t wait until the IRS calls and then put the documents together. You have to get the documentation before your file your tax return and preferably as close to possible to the date of the actual contribution.

Documentation for Cash Contributions

You must maintain a record of cash contributions. Options include a bank record or written communication from the donee. The written communication should include the name of the charitable organization, the date of the contribution and the amount of the contribution. Multiple contributions can be documented on a single form.

In the case of payroll deductions, like the CFC, your pay statements count for documentation as long as you have the form you filled out to make the contribution.

If you contribute $250 or more to single charity in a single contribution your documentation must also contain whether the charitable organization provided any goods or services in return for the donation. As an example, the value of a charitable dinner would need to be included and would reduce the amount of the charitable contributions. Religious organizations should include a statement that only “intangible religious benefit” was received for contributions given as an offering.

Documentation for Non-Cash Contributions

In the case of non-cash contributions, there are several different levels of documentation. For contributions of less than $250 you need the name and address of the charitable organization, the date of the contribution and a description of the property. If you are gifting securities (which can be a really good idea), you need to include information about the security.

If your contribution exceeds $250 but is less than $5,000, then you need a written (contemporaneous) acknowledgement from the charity.

If your contribution exceeds $5,000 you need to do the same as above but you must obtain a qualified appraisal conducted by a qualified appraiser and complete and file a Form 8283. The 8283 needs to include information about the appraiser.

There are other rules for contributions in excess of $500,000, but I’ll skip them.

There are different rules for donating autos, so if you go this route, you’ll want to check them out.

It Isn't Simple and It Takes Time

If you've succeeded in the military, you can figure most things out. That probably is true with the tax code as well. But, you can't assume that you and your tax software know what needs to be done. If you don't want to spend the time to learn the intricacies of our tax code and how to use the tax code to your advantage in your financial plan, give us a call.

If you found this article useful, you might like the following blog posts:

Watch Out for this Tax Tripwire


Military Finances 101: Inheritance and Estate Taxes. Do You Know the Difference?


Military Finances 101: What Is the Difference Between a Tax Credit and Tax Deduction?




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