Filed under: Not-for-Profits

By Sarah Huang, CPA

Last September, the IRS issued a proposed regulation indicating Treasury would implement a new form for charities to report donations to the IRS. This form would include personal donor information, including their Social Security number and address, so the IRS could match the form with the donor’s income tax return. After receiving much opposition to the potential form, the IRS withdrew the proposed regulation on January 7. See our November 2015 article, IRS Issues New Donor Acknowledgment Proposed Regulations – Benefit or Burden? for more discussion on the proposed regulation.

Many charities and donors see this as a huge win. Donations today are frequently made using a credit card. In the age where cyber hacks are common, donors are hesitant to provide credit card information with their Social Security number in order to make a donation. If a charity doesn’t have proper safeguards in place for this data, it could lead to identify theft for the donor.

The IRS received nearly 38,000 comments on the proposed regulation with the vast majority against the potential form. Legislation was even introduced in the Senate last December to block the IRS from collecting this information. The proposed reporting was never a requirement for charities; it was simply an alternative to the standard donor acknowledgement letter. However, many were concerned it would only be a matter of time before the form became mandatory.

Going forward, charities should continue to issue acknowledgement letters to their donors as they have in the past. Until finalized regulations provide for an alternative means to substantiate donations, donors remain responsible for keeping records to substantiate their charitable donations. Failure to do so may lead to the charitable deduction being disallowed by the IRS.

© Clark Nuber PS, 2016. All Rights Reserved

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.