Contributions to victims of the recent earthquakes in Chile or Haiti must be
made by April 15, 2010, in order to claim those contributions as charitable
deductions on 2009 income tax returns. This accelerated deduction was approved
on March 10, 2010, when the House of Representatives passed H.R. 4783, allowing
taxpayers to take a charitable deduction on their 2009 income tax returns for
contributions to aid victims of the Feb. 27, 2010, earthquake in Chile. The
accelerated deduction is available for contributions made through April 15,
Taxpayers can claim cash, credit card and cell phone donations as charitable
contributions under the bill, as long as the charities are qualified under Code
section 170. A cell phone bill showing the contribution date, the donee
organization, and the contribution amount, meet the recordkeeping requirements
of Code section 170(f)(17). The Senate has not yet scheduled action on the House
H.R. 4783 also extends the donation deadline through April 15, 2010, for
contributions to Haiti’s disaster relief efforts. In the days immediately
following the Jan. 12, 2010, earthquake that struck Haiti, Congress passed P.L.
111-126 in a bipartisan effort to allow certain charitable donations to the
Haitian relief effort made in 2010 to be deducted as if they were made in 2009.
That bill allows cash contributions, including those made by text message, made
to charities providing earthquake relief in Haiti after Jan. 11, 2010, and
before March 1, 2010, to be deducted on a U.S. taxpayer’s 2009 or 2010 return.
IRS Warns of Abuse of Charitable Organizations & Deductions
Contributions to domestic tax-exempt, charitable organizations that provide
relief assistance to individuals in foreign countries qualify as tax deductible
contributions for federal income tax purposes provided that the U.S. domestic
organization has control and discretion over the use of the funds. However, the
IRS has cautioned about certain unscrupulous actions of donors and charities
misusing tax-exempt status.
On its 2010 list of “Dirty Dozen Tax Scams,” the IRS warned taxpayers against
misuse of tax-exempt organizations and charitable deductions. The IRS regularly
looks for abuse in arrangements with charities that impermissibly hide income or
assets from taxation or that allow donors to control donated assets or the
income from donated property. One common scheme involves a non-cash asset being
donated with multiple charities claiming the entire value of the receipt and
distribution of the same contribution.
Donations can be grossly overvalued or a donee organization may grant the
donor an option to repurchase the item at a value set by the donor. The Pension
Protection Act of 2006 included enhanced definitions of qualified appraisal and
qualified appraiser for charitable contributions. It also imposed stricter
penalties for faulty appraisals.
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