Proper documentation of charitable contributions is essential in order to receive a tax deduction. In a recent United States Tax Court decision, a married couple’s deduction of over $22,500 in contributions to their church was disallowed because the church failed to provide a proper receipt. The problem? A year-end contribution statement from the church failed to state that no goods or services were provided in exchange for the contributions. A corrected contribution statement issued when the couple was audited did not fix the problem as the Court deemed it untimely. The result? A tax deficiency of more than $7,500.

The lesson for us? Follow the letter of the law when it comes to documenting charitable contributions. Here’s what we all need to do:

• Have a bank record or a written acknowledgement from a charity for any monetary contribution claimed on a federal income tax return.
• Obtain a contemporaneous, written acknowledgment for each contribution of $250 or more. (An annual summary issued by January 31 of the year following the donations will be sufficient.)
• Obtain a written disclosure from each charity for any goods or services received in exchange for a payment exceeding $75.

A written acknowledgment, issued when a donor receives nothing substantial in exchange for a contribution, must include:

• The name of the charity.
• The amount of a cash contribution.
• A description of a non-cash contribution.
• A statement that no goods or services were provided in return for the contribution, if true.
• A description and good faith estimate of the value of any goods or services provided in return for the contribution.
• A statement that the goods or services provided were either intangible religious benefits or were insubstantial, if true.

A written disclosure, issued when a donor makes a payment of more than $75 that is partly contribution and partly purchase (e.g., a ticket for a fundraising banquet), must include:

• A statement that the amount deductible for federal income tax purposes is limited to the excess of the value of the donor’s contribution over the value of the goods or services provided by the charity.
• A good faith estimate of the fair market value of the goods or services provided.

We live in a country that is exceptionally generous, under a government that encourages our generosity by allowing us tax breaks for much of our giving. There’s no sense in losing out on those tax breaks simply because we failed to get the paperwork right!