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How taxpayers can make sure their donations are tax deductible

Taxable Dedcutions

It’s that time of year when taxpayers are thinking about how they want to give back, and many taxpayers will want to donate to a charity that means something to them. The IRS has a tool that may help them make sure their donations are as beneficial as possible.

Tax Exempt Organization Search on IRS.gov is a tool that allows users to search for tax-exempt charities. Taxpayers can use this tool to determine if donations they make to an organization are tax-deductible charitable contributions. 

Here are some things to know about the TEOS tool:

  • It provides information about an organization’s federal tax status and filings.
  • It’s mobile device friendly.
  • Donors can use it to confirm that an organization is tax-exempt and eligible to receive tax-deductible charitable contributions.
  • Users can find out if an organization had its tax-exempt status revoked.
  • Organizations are listed under the legal name or a “doing business as” name on file with the IRS.
  • The search results are sortable by name, Employee Identification Number, state, and country.
  • Users may also download entire lists of organizations eligible to receive deductible contributions, auto-revoked organizations and e-Postcard filers.


Taxpayers can also use the Interactive Tax Assistant, Can I Deduct my Charitable Contributions? to help determine if a charitable contribution is deductible.

IRS updates guidance for deductible business, charitable, medical and moving expenses

Business Expenses

The Internal Revenue Service today issued guidance for taxpayers with certain deductible expenses to reflect changes resulting from the Tax Cuts and Jobs Act (TCJA).

Revenue Procedure 2019-46, posted today on IRS.gov, updates the rules for using the optional standard mileage rates in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes.

The guidance also provides rules to substantiate the amount of an employee’s ordinary and necessary travel expenses reimbursed by an employer using the optional standard mileage rates. Taxpayers are not required to use a method described in this revenue procedure and may instead substantiate actual allowable expenses provided they maintain adequate records.

The TCJA suspended the miscellaneous itemized deduction for most employees with unreimbursed business expenses, including the costs of operating an automobile for business purposes. However, self-employed individuals and certain employees, such as Armed Forces reservists, qualifying state or local government officials, educators and performing artists, may continue to deduct unreimbursed business expenses during the suspension.

The TCJA also suspended the deduction for moving expenses. However, this suspension does not apply to a member of the Armed Forces on active duty who moves pursuant to a military order and incident to a permanent change of station. 

Taxpayers who donate to charity should check out these resources

Donations and Charities

Taxpayers who donate to a charity may be able to claim a deduction on their tax return. These deductions basically reduce the amount of their taxable income. Taxpayers can only deduct charitable contributions if they itemize deductions.

Here are some resources for people making donations:

Tax Exempt Organization Search
Taxpayers must give to qualified organizations to deduct their donations on their tax return. They can use this tool to find out if a specific charity qualifies as a charitable organization for income tax purposes.

Publication 526, Charitable Contributions
This pub explains how taxpayers claim a deduction for charitable contributions. It goes over:

  • How much taxpayers can deduct.
  • What records they must keep.
  • How to report contributions.

Publication 561, Determining the Value of Donated Property
Taxpayers generally can deduct the fair market value of property they donate. This publication helps determine the value of donated property.

Form 8283, Noncash Charitable Contributions
Taxpayers must file form 8283 to report noncash charitable contributions if the amount of this deduction is more than $500. The instructions for this form walk taxpayers through how to complete it.

Schedule A, Itemized Dedications
Taxpayers deducting donations do so on Schedule A. The instructions for this form include line-by-line directions for completing it.

Frequently asked questions: Qualified charitable distributions
Taxpayers age 70 ½ or older can make a qualified charitable distribution from their IRA – up to $100,000 – directly to an eligible charity. It’s generally a nontaxable distribution made by the IRA trustee to a charitable organization. A QCD counts toward their minimum distribution requirement for the year.


More information:
Tax Topic 506 – Charitable Contributions
Deducting Charitable Contribution at a Glance

Tips to help organizations understand the tax-exempt application process

A charitable organizations

Organizations that want to apply for tax-exempt status under Section 501(c)(3) of the tax code use a Form 1023-series application. Here are some things organizations should know to help them understand the process:

  • The application must be complete. It must also include the user fee.
  • The application process on IRS.gov includes a step-by-step review of what an organization needs to know and what to do in order to apply for tax-exempt status.
  • There are a few types of organizations that do not need to apply for 501(c)(3) status to be tax-exempt. These are churches and their integrated auxiliaries, and also public charities whose annual gross receipts are normally less than $5,000.
  • An employer identification number is an organization’s account number with the IRS and is required for the organization to apply for tax exempt status. Every tax-exempt organization, including a church, should have an EIN regardless of whether the organization has employees. After getting an EIN, the organization must include it on the application. Organizations may get an EIN by calling 1-800-829-4933 or by applying online.
  • Generally, an organization that is required to apply for recognition of exemption must notify the IRS within 27 months from the date it was formed.
  • When the IRS determines an organization qualifies for exemption under Section 501(c)(3), it will also be classified as a foundation, unless the organization meets the requirements to be treated as a public charity.
  • A charitable organization must make certain documents available to the public. These include its approved application for recognition of exemption with all supporting documents and its last three annual information returns.
     
  • The organization must provide copies of these documents upon request. The organization may charge a reasonable fee for reproduction and copying costs. Organizations that fail to comply may face penalties.

More information:

Internal Revenue Bulletin 1999-17

Did the 2017 Tax Cuts and Jobs Act discourage you from charitable giving?

A study of the new tax law conducted by the Lilly Family School of Philanthropy at Indiana University posed that the increase in the standardized deduction would dissuade donors who normally write-off those contributions.  By now you have probably already done your 2018 taxes – the first year the new law goes into effect.  The good news, the standardized deduction just about doubled (to $12,000 for single, and $24,000 for married).  The bad news, if you had regularly written of deductions just over and above the old standard deduction then you will have kept all those receipts and records for nothing, right? 

In the study, the Lilly Family School of Philanthropy supposes that because a charitable contribution deduction is now not available to most tax payers, donations to charity will be down.  And according to Giving USA, charitable contributions were down slightly over 2017 as adjusted for inflation.  Of course, if the tax deduction were the only reason to give we might just chuck the receipts, take the standard deduction, and call filing taxes that much easier. 

But maybe with a little planning and forethought we might be able to do both?  If you regularly give to charity you might bundle a few years worth of donations into one calendar year and then take advantage of itemizing one year, taking a standard deduction the next, and still have that warm and fuzzy feeling of contributing to your community.

Or consider those regular charitable donations you give to be simplified for you (no need to keep track unless you are nearing your standard deduction) and already “written off” and keep getting that warm and fuzzy feeling when you donate.  Planning for tax time – even in mid-year – is never too early!

Tool on IRS.gov helps taxpayers research charities before making donations

Tool on IRS.gov helps taxpayers research charities before making donations

When people are done giving thanks at the dinner table, many start another kind of giving. The annual Giving Tuesday happens the week after Thanksgiving to kick off the season of charitable giving. This year, Giving Tuesday falls on Tuesday, November 27.

Taxpayers may be able to deduct donations to tax-exempt organizations on their tax return. As people are deciding where to make their donations, the IRS has a tool that may help. Tax Exempt Organization Search on IRS.gov is a tool that allows users to search for charities. It provides information about an organization’s federal tax status and filings.

Here are four facts about the Tax Exempt Organization Search tool:

  • Donors can use it to confirm an organization is tax exempt and eligible to receive tax-deductible charitable contributions.
  • Users can find out if an organization had its tax-exempt status revoked. A common reason for revocation is when an organization does not file its Form 990-series return for three consecutive years.
  • EO Select Check does not list certain organizations that may be eligible to receive tax-deductible donations, including churches, organizations in a group ruling, and governmental entities.
  • Organizations are listed under the legal name or a “doing business as” name on file with the IRS. No separate listing of common or popular names is searchable.

Taxpayers can also use the Interactive Tax Assistant, Can I Deduct my Charitable Contributions? to help determine if a charitable contribution is deductible.

Taxpayers may also want to decide now if they’ll itemize their deductions when they file next year. Last year’s tax reform legislation made changes to the standard deductions and itemized deductions. Many individuals who formerly itemized may now find it more beneficial to take the standard deduction. So, taxpayers should check their 2017 itemized deductions to make sure they understand what these changes mean to their tax situation for 2018. More information about these changes is on IRS.gov/taxreform.

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