New IRS rules require receipts for church donations

Posted: 1/19/07

New IRS rules require
receipts for church donations

By Jeff Diamant

Religion News Service

WASHINGTON (RNS)—The next time you toss dollar bills into the church collection plate, consider asking the usher for a receipt.

New federal rules for the 2007 tax year—which took effect Jan. 1—forbid tax deductions for charitable donations unless the taxpayer can prove the donation through receipts or other official financial records.

The rules, enforced by the Internal Revenue Service, require that people claiming charitable donations back up those deduction claims with documentation. Acceptable documentation includes canceled checks, records from banks, credit card companies or credit unions or written notices from the charity or not-for-profit institution.

In the past, the IRS has allowed personal notes, diaries or bank registers as sufficient proof that a person actually placed money in the offering plate each week of the year.

Congress approved the new guidelines in August, as an add-on to the Pension Protection Act of 2006, which deals mostly with pension and retirement savings. President Bush signed them into law. The new rules cover monetary donations to any charitable institution, not just religious ones.

The changes should not affect the giving habits of people who already donate in church-provided envelopes, with checks or over the Internet. They still can receive records from the church, bank or credit card company and present them to their accountant.

Still, a lot of money is given anonymously. And cash donors who throw their bills unfettered into collection plates must change their habits if they want to claim deductions, said Todd Polyniak, a partner in Sax Macy Fromm & Co., a business accounting and consulting firm in Clifton, N.J.

“They’re making it much more difficult for you to say you gave money you truly didn’t give, even if it’s small dollar amounts,” he said.

In the end, Polyniak said, some not-for-profit organizations will bear the burden of the new rules, because offering receipts for every cash donation would strain their resources.

“A lot of them don’t have the resources to provide all this documentation,” he said. Providing it for everyone is “going to take away from their mission. Or they’re going to have to say to folks who are contributing cash, ‘Look, we can’t really provide you with the documents.’

“I feel the pain of the not-for-profits more than for the government, but I can understand why the government’s doing it. … The government is responding to what they perceive as abuse, and the way they see it, a lot of small dollars add up to big dollars.”

Jeff Diamant writes for The Star-Ledger in Newark, N.J.

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