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The charitable proof is in the tax pudding

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in Small Business Tax

Undoubtedly, the deduction for charitable donations is one of the biggest write-offs on your personal tax return. That’s why the IRS continues to scrutinize deductions claimed by high-­income taxpayers.

Strategy: Stick to the strict letter of the law. In particular, make sure you comply with all the record-keeping requirements in this area.

Be aware that recent tax law changes impose tough substantiation rules on cash and cash-equivalent donations. Now, a new ruling shows that the IRS truly means business.

Here’s the whole story: Effective for contributions in tax years beginning after Aug. 17, 2006, no deduction is allowed for any contribution of cash, check or other monetary gift unless you can show a bank record or written communication from the charity. The written communication must indicate:

  • The amount of the contribution
  • The date you made the contribution
  • The name of the charitable organization.

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