Friday, September 29, 2006

An interesting story from my tax teacher on why you now need to get receipts for charitable donations individually over $250, BUT not total

You know the new tax rule that you now have to get a receipt for any cash donation over $250? You can't just use a cancelled check anymore, you need better proof. BUT, you could write 10 checks for $100 and they'd take each one individually as proof. As always, people who abuse the system create consequences for the rest of us.

Evidently some years ago there was this guy who every single week made a really, really big check out to his church, and used the cancelled checks to deduct charitable giving of more than 30% of his income. That's below guidelines, but it's still a LOT of money, and made up more than ten percent of the church's income. The auditors felt something was up but could not find anything amiss. This guy deducted over $10,000 a year to his church - and had all the cancelled checks to prove it.

Eventually they figured out what was happening - each week the guy would do his church a favor and relieve them of the cash in the offering plate, and writing one large check for the total, which the church would then cash. I guess none of the other members were deducting much, since it was cash, but this guy took all the credit without giving all the money! So now all of us have to have receipts clearly stating we gave that money for anything larger than $250, but individual amounts lower than that don't require receipts unless they're cash.


bluntmoney said...

Geez, someone really did that? Although I can think of instances where you WOULD get a receipt but have not actually donated the money yourself. For example, when my mom died a lot of people gave cash as contributions to the charity of our choice. I sent the money to hospice, who gave me a receipt. But it wasn't my money... (And no, I didn't claim it on my taxes.)

Kira said...

Oh, the sordid tales that come from tax offices.. =) Yeah, it alternately surprises and doesn't surprise me when somebody abuses something like a church for their own personal financial gain.

Anonymous said...

Great story.