Is That Charitable Contribution Deductible?

Like many Americans, you make contributions to charitable organizations out of the goodness of your hearts…and the tax deduction. But is that contribution actually deductible?

This article is an alert to individual taxpayers, but is also a wakeup call to responsible parties of tax exempt organizations. Continuation of your tax exempt status is no longer a given, if you have not fulfilled your reporting requirements.

A few days ago, IRS announced that approximately 275,000 organizations had automatically lost their tax exempt status, because they did not file legally required annual reports for three consecutive years. At the same time, the Service also announced special steps to help organizations apply for reinstatement of their tax exempt status.

In 2007, a filing requirement was imposed on small organizations, where there had been no requirement previously. At the same time, the law allowed IRS to automatically revoke the tax exempt status of any organization that didn’t file the required returns for three consecutive years. Since that time, IRS has made many efforts to inform exempt organizations of these changes, and also gave smaller organizations additional time to file required returns.

All exempt organizations are required to file one type of Form 990 or another. There is the ‘long form’ 990 (Return of Organization Exempt from Income Tax), the ‘short form’ 990-EZ, and the 990-N ‘e-postcard’. For organizations with annual gross receipts of $50,000 or less for 2010, the filing requirement is satisfied by submitting the e-postcard. Not filing at least one of these three returns for the last three years subjects an exempt organization to the automatic revocation of its exempt status. For organizations that have had their exempt status revoked, IRS has procedures for reinstatement that include reduced application fees.

Now back to you, the one making the charitable contribution. Before you take that deduction, check the IRS website, as they have lists of organizations that qualify as public charities, as well as lists of organizations that have had their exempt status revoked. You may only take a deduction for contributions made to qualifying charitable organizations.

If you have any questions about this, please contact me, and please post a comment. And if you have any friends who are involved in small exempt organizations, have them read this article.

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