The Internal Revenue Service needs to do a better job of reviewing the non-cash charitable contributions deductions taxpayers are claiming.
According to a recent estimate released in a Treasury Inspector General for Tax Administration report, more than 100,000 taxpayers could have claimed a total of $1.8 billion in unsubstantiated contributions during an eight-month period reviewed during 2006.
TIGTA said that while the IRS has revised the related tax forms and publications, and provided training and information to employees to facilitate implementation of new requirements passed by Congress, both taxpayers and tax practitioners still need to be better educated
The additional reporting requirements passed by Congress require taxpayers to substantiate the value of some non-cash donations. Individual taxpayers are required to file Form 8283, “Noncash Charitable Contributions,” if their charitable deductions claimed exceed $500. If the value of donated property exceeds $5,000, taxpayers are required to obtain qualified appraisal signatures acknowledging receipt of the donated property.
Specifically, TIGTA recommended that a number of IRS divisions coordinate the development of procedures to correspond with taxpayers who need to provide missing Forms 8283 and supporting documentation. Taxpayers failing to provide such substantiation should have a specific audit code input on their tax returns.
The full report, “The IRS Needs to Improve Procedures to Identify Noncompliance with the Reporting Requirements for Non-Cash Charitable Contributions,” is available at www.ustreas.gov/tigta/auditreports/2007reports/200730049fr.pdf.
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