If you itemize your taxes every year, and make charitable donations, you can use a percentage of the donation to lower your tax liability. It is a win-win for the taxpayer as they receive a tax benefit from their generosity, as well as the overall sense of well-being from the donation.
However, there is always the possibility that the IRS will flag your return for an audit. It’s a given that audits are no fun, but it’s even worse when the taxpayer does not have all of their proper documents. Charitable donations used for reduction of tax liability are under tight scrutiny because of rampant abuse in the past.
In years past, the IRS allowed cash donations to be used in itemized deductions with little to no paperwork. The unscrupulous abused this fact badly, causing the IRS to move towards the paperwork requirement. A donor now needs to have a receipt from the charity on file for any type of donation.
Any one who intends to itemize their tax deduction and use donations now needs to make sure they ask for a receipt. Make sure you get documentation before you pull that $20 out of your wallet.
It may be that you never find yourself on the receiving end of an IRS audit. Many never do. No matter what you do, don’t tempt fate by not getting and keeping all of your charitable donation receipts. Hang on to all of your proof whether it be it clothing, household items, a car, cash or any other items.