IRS Placing Emphasis on Charitable Contribution Documentation

One of the main concerns the IRS has grappled with in the past few years is the "tax gap". In short, this is the difference between what income is reported and what the reality actually is. One area that many people have taken liberties with is their reporting of charitable contributions. Based on research conducted by the IRS it is clear that the amounts reported for charity do not reflect the reality.

In an effort to close the tax gap the IRS has come up with a new strategy. The strategy is to essentially subject tax preparers to penalties should teheir clients under report income or over report their deductions.

So how does this affect our clients:

1) We will be reminding everyone that they must have documentation for any charitable deduction they take. Documentation can be in the form of a letter from the charitable organization or a bank record.

2) We will have all clients sign a document that they do in fact have records of these contributions that can be produced in the event of an audit.

In other words, tax preparers should no longer be taking your word for these deductions as we are now on the hook with the taxpayer.