Increase in cash donations (actual $100 bills)

[holtaboy]

Guys - I'm filing personal returns before the extension deadline next month.  It turns out my w-2 jumped 70% last year as my company landed a very large customer deal that I worked on and thus landed up donating more too, especially with cash donations (actual currency). In the past few returns, I can see my cash donation has hovered between 3.5-4% of AGI. I do all my taxes myself now, but I do remember a tax advisor in the past said that any big jump in increase of ACTUAL cash donations irrespective of your earnings that year can trigger an audit. I am calculating 4.4% for this year but compared to last year my actual cash donations have jumped 40% for 2023. Although I have records of everything, I certainly do not want to trigger an audit. Is the statement in bold accurate?

Thanks

[Opus 17]

Cash donations are not deductible unless you have a receipt from the donor.  That's in black and white on page 19-20 here. https://www.irs.gov/pub/irs-pdf/p526.pdf

That's not to say you can't list them, but if you do, and if you are audited, you can expect to lose those deductions.

I don't think anyone here has any insider knowledge on what triggers an audit (or a lower level IRS letter).  I got a letter one year about my donations (not a full audit, just a letter asking to see proof of the donations), but since I had filed an amended return, I explained that, and they never wrote back to ask about the amended return.  I suppose my file was selected randomly and my response allowed them to close it out in the system, and the system did not select my amended return.  Who knows?

[VolvoGirl]

Do you have enough total deductions to itemize?  Or did you take the Standard Deduction? Since the Standard Deduction has increased many people switched to the Standard Deduction.  And there is a max 10,000 limit (5,000 MFS) of property tax and state taxes "SALT".  SALT is State And Local Tax.  Which includes property tax, any state tax paid like for last year’s return and includes any state withholding from your W2s and any 1099s you have. And any taxes in W2 box 14 and 19 like SDI or VDI. You can only deduct up to 10,000 (5,000 MFS) for SALT State and Local Taxes.

[Mike9241]

also, unless there something else on your return that jumps out as out of line (not the w-2) if the iRS were to audit for the contributions it would likely be confined to that area. you either provide the proof requested or lose the deduction and receive a bill from them 

[rjs]

No one can tell you whether the statement by your former tax advisor is accurate. No one outside the IRS knows what conditions can trigger an audit. It's a closely guarded secret. That also means that, unless the tax advisor who made that statement previously worked for the IRS, the tax advisor doesn't know what conditions can trigger an audit. You don't know what the source of the tax advisor's information was. Also, the IRS is continually refining its audit criteria, so what was true a few years ago might no longer be true.

One thing we do know is that Schedule A in your tax return shows only a single total amount for donations by cash, check, credit card, and other payment methods. So the IRS cannot tell from your tax return how much you donated in actual cash.

We also know that the IRS selects some tax returns for audit at random. There is no way to be absolutely sure that you won't be audited.

[rjs]

This is not what you asked about, but your description of your donations makes me wonder whether your cash donations are deductible at all. In order to deduct a cash donation of any amount you must meet two requirements.

(1) You must give the money to an organization that is authorized by the IRS to accept tax-deductible contributions, AND

(2) As Opus 17 mentioned earlier, you must have a receipt from the organization showing the name of the organization and the date and amount of the donation. Your own records of your donations do not meet this requirement. The receipt has to come from the organization.

If you hand a $100 bill to a beggar or a homeless person on the street, that is not a deductible donation because the person is not an authorized organization. (Also, a donation for the benefit of a specific person is not deductible, even if the donation is made to an authorized organization.)

If you put a $100 bill in a charity box, or in the collection plate at a church, the church or other organization is an authorized organization, but you cannot deduct the donation because you don't get a receipt. In a question that you posted a couple of years ago you said that you make cash contributions to a religious institution and don't get a receipt. You cannot deduct those contributions because you don't have a receipt, even though the religious institution is authorized to accept tax-deductible contributions.

If you give cash to someone who says he or she is collecting money for charity, the person may be giving the money to an authorized organization. But you cannot deduct the donation unless you get a receipt from the organization. A receipt from the person who is collecting the money does not meet the requirement.

[Opus 17]

I will note here, that if you put your cash in an envelope with your name on it, put it in the collection box at the church, and the bookkeeper credits it to your account and gives you a year-end statement, that satisfies the receipt requirement.  It does not have to be a physical receipt on the day of donation.  However, dropping anonymous cash with no proof may be very satisfying, but is not deductible.