Last time, we mentioned a legislative proposal that would make significant changes to tax law, changes that are very likely to have a significant negative impact on charitable giving. It isn’t clear yet how far the proposal will advance—there are certainly opponents—but if it does, the effects could be widespread, hitting nonprofit organizations hard.
Those who choose to make charitable contributions need to understand, of course, the rules surrounding charitable deductions in order to ensure they comply with the tax code. The general rules surrounding charitable contributions touch upon: the types of organizations to which charitable deductions may be made; the types of contributions taxpayers can deduct; how much can be deducted; the records that must be kept; and how taxpayers are supposed to report charitable contributions.
Those who make charitable contributions should be sure to take advantage of the ability to deduct when it makes sense to do so. Care should be exercised in documenting charitable gifts and in accurately reporting them to the IRS, though. One of the common grounds for IRS audit is discrepancies in claiming deductions.
Often, when the IRS targets a taxpayer for a discrepancy related to deductions for charitable gifts, the matter can be cleared up relatively easily. When major mistakes are made, though, a taxpayer can end up owing the IRS in penalty fees and interest. Working with experienced legal counsel in these situations ensures a taxpayer’s rights are protected and that he or she has the best possible opportunity to resolve the case in a favorable way.