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IRS tightens donation rules

Associated Press The Spokesman-Review

WASHINGTON — Beginning in the 2007 tax year, taxpayers must provide bank records or other information when claiming deductions for charitable donations of money, the Internal Revenue Service said in newly released guidelines.

The IRS said that bank records can include canceled checks, bank or credit union statements and credit card statements that show the name of the charity and the transaction posting date.

Taxpayers may also submit a written communication from the charity with the organization’s name, the date of the transaction and the amount of the contribution.

Money donations are defined as those made in cash, or by check, electronic funds transfer, credit card or payroll deductions. For payroll deductions, the taxpayer should retain a pay stub, W-2 wage statement or other document showing the amount withheld for charity along with the pledge card showing the name of the charity.

Previously, taxpayers could back up donations of money with personal bank registers, diaries or notes made around the time of the donation. Such records are no longer sufficient.

There’s no change in the requirement that a taxpayer get an acknowledgment from the charity for each deductible donation of $250 or more.

The new rules apply to contributions made in taxable years beginning after Aug. 17, 2006, or in 2007 for the large majority of individual taxpayers filing on a calendar-year basis.

The tax agency also reminded people making year-end donations that donations charged to a credit card before the end of the year count for 2006, even if the credit-card bill isn’t paid until next year. Checks also count for 2006 as long as they are mailed this year.

Under a law passed last summer, an IRA owner aged 70 1/2 or older can directly transfer tax-free up to $100,000 per year to an eligible charitable organization. This option is available in tax years 2006 and 2007, but does not apply to employer-sponsored retirement plans. To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity.