On May 17, 2012, the US Tax Court filed a ruling that disallowed a taxpayer’s charitable donation to their church because the church “failed to provide a properly completed contemporaneous written acknowledgment of the contribution.”
Does your church receipt letter comply with the IRS substantiation requirements? Under Code Sec. 170(f)(8)(B), the acknowledgment must state whether or not the church provided any goods or services for the contribution. If goods or services were received, it must include a description and good faith estimate of the value of goods provided. Also, the acknowledgment must be received by the taxpayer on or before the earlier of: 1) the date the taxpayer files the original return for the tax year of the contribution; or 2) the due date (including extensions) for filing the original return for the year.
In this tax court case, the church statement did not acknowledge that no goods or services were received. The church tried to rectify this by later submitting a revised statement, but this acknowledgement failed the second test of substantiation because it was received by the taxpayer after the taxpayer filed their return.
Now may be a good time to review your gift acknowledgements. Are your receipt letters in compliance?