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Why You Must Document Your Charitable Deductions

NEW YORK ( TheStreet) -- It is very important that you keep good records to document your charitable contributions.

A deduction will not be allowed for any contribution made by cash or check unless you have a hard-copy record of the contribution. The record must be in the form of:

  • an actual canceled check
  • a bank record (for instance, a copy of the front of the check included on your monthly bank statement)
  • an entry on a bank or credit card statement indicating a credit or debit card charge
  • a written communication from the donee showing the name of the donee organization, the date of the contribution and the amount of the contribution.

In the case of a payroll deduction for United Way or any other charity the IRS tells us:

"For a charitable contribution made by payroll deduction, a pay stub, Form W-2 or other employer-furnished document that sets forth the amount withheld for a payment to a donee organization, along with a pledge card prepared by or at the direction of the donee organization, will be deemed to be a 'written communication from the donee organization' that satisfies the requirements."

You can no longer tell the IRS that you put a five- or 10-dollar bill in the collection plate each week. You must write a check to the church for the $5 or $10 each week or take advantage of the church's "envelope" system, which will provide you with a written receipt at the end of the year.

The law does not say that all contributions of more than $50 or more than $100 must be documented. It says all cash contributions must be documented. If you give the Disabled American Veterans a dollar for a poppy, you must get a receipt!

If you give $250 or more in one gift, you must get a written receipt or acknowledgement from the charity at the time the donation is made. This receipt or acknowledgement must include the name and address of the organization and the date and amount of the contribution, and -- very, very important -- must include the statement that "No goods or services were provided by the organization in return for the contribution." Tax Court has denied a charitable deduction on several occasions when the receipt from the organization did not include this statement.

If you donate clothes, food, household items, furniture and the like, you can claim a deduction for the "fair market value" of the items donated. You are responsible for determining the fair market value. The charity to which you make the donation is not required to, and in most cases will not, provide you with a value. (The websites of the Salvation Army and Goodwill Industries provide valuation guides you can use.)