Charitable Contributions

An email/letter from the company saying that they will waive the fee of $1,500 as a donation is sufficient. You do have to send them a letter acknowledging the donation, as you hopefully do for any donation.

Contrary to common expectations, a charity is not required to furnish receipts, whether for over 250$ or less. It is customary and good practice to do so, however.

But IRS does not require it.

Pub 506 says, "For any contribution of $250 or more ..., you must obtain and keep in your records a contemporaneous written acknowledgement from the donee organization ...."

And Pub 526 says, "You can claim a deductions for a contribution of $250 or more only if you have an acknowledgement of your contribution from the qualified organization or certain payroll deducsion records."

So I guess you're literally correct in saying that the organization doesn't have to provide a receipt. But if they don't, you can't deduct it. The charity would be shooting themselves in the foot by refusing to provide receipts -- most potential donors will prefer that their contributions be deductible (charities generally emphasize this feature of donations).

Sounds like he's trying to get a deduction for services. That's not allowed. If you pay him $1500 and then he gives it back, he'll have both income and an offsetting deduction. But he can't get just the deduction.

If you give him a letter you received a $1500 contribution when you received services instead of cash, it could be considered tax fraud.

Exactly. But I'd doubt that would serve his purposes.

Correct. However, if he would normally owe dues of $2000 and he wants to pay only $500, that's not a problem (with taxes, anyway).

Seth

Perhaps you should send him a thank you letter for his donated services, his stated value of $1500.00 being so very generous.

then, the tax matter is up to him and him alone. And it should not be considered out of the ordinary to thank someone.

maybe his purpose is not a tax deduction at all. Maybe his purpose is to avoid other members thinking he is a cheapskate for not donating.

"Barry Margolin" wrote

Correct. The non-profits I sit on the Boards of frequently provide letters to larger donors. We have the standard blurb about the donor consulting their tax advisor about their specific deductibility.

I hate giving out letters where services were "donated". We have cooked the letter down to "thanks for the SERVICES you provided" and do not mention any monetary amount.

Out of pocket donations exceeding $250/year require the section 170A(f)(8) acknowledgement letter to be deductible.

The service provider may deduct only his actual costs, not the value of his service at the rate he normally charges. Your letter should NOT state a valuation of $1,500.00.

Are you suggesting that if he were a member and so was required to pay $2,000 per year to maintain his membership, that he would be allowed to deduct his $1,500 service contribution?

Deductible or not, in this case, he might have cancellation of debt income.

No, I'm suggesting that he might pay $1,500 of his dues with services.

A lot of religious organizations make their dues (nominally) voluntary.

Seth

There's more to this than first appears and doing this could be trouble for your church.

In order for an item to be deductible as a charitable contribution there has to be some economic disbursement by the person claiming the deduction. In your situation the business could claim a deduction for their actual costs associated with providing the service - this would include parts and documented labor actually paid the person who did the work. This is where it gets tricky -

See the business gets to deduct these ANYWAY as a regular cost of doing business. They do NOT get a second deduction because they did them for a church.

AND you have no way of knowing what their actual costs were. For all you know it cost him $1.00 to do what you needed done.

If he wants a deduction for $1,500 then -

The church can write him a check, which would be income to him and he can cash it and give the money back OR

He can write a check to the church for $1,500 and get the deduction.

But YOU have no way of knowing WHAT his costs where and I'd recommend against doing what you've been asked to do. Doing it is asking for trouble.

Gene E. Utterback, EA, RFC, ABA

I don't recall that Bill specified whether the purpose was for a charitable contribution deduction, or payment in kind for church membership dues.

Seth