IRS cracks down on donor tax deductions

During the first nine months of 2006, some of $1.8 billion in noncash gifts reported by taxpayers lacked documentation, a government study shows. So the IRS is cracking down, says a report in Baron’s Online.

“Whether you donated $50 to your local library or a Warhol to your alma mater, your charitable transactions of 2007 are far more likely to be scrutinized by the IRS than in past years,” the magazine reports. “The mood is ugly,” says Conrad Teitell, a tax attorney at Cummings & Lockwood in Stamford, Conn. “Congress is not happy and has instructed the IRS to take a closer look. There is a big deficit of dollars the IRS doesn’t have because people are claiming deductions they aren't entitled to,” Teitell told the magazine.

A number of new rules were adopted by Congress last year to help prevent taxpayers from making errors or cheating the system. These make it easier than ever to flag both inadvertent mistakes and outright cheats. The danger areas for 2007 tax filings include giving used cars, valuations on noncash gifts, gift deductions of items such as art or antiques, unsubstantiated cash gifts, donor-advised funds, annuities and charitable trusts.