A recent IRS proposal that would have required charities to collect donors' social security numbers as a way of verifying and substantiating donors' charitable contributions (and ultimately, donors' charitable deductions) has been withdrawn by the IRS.
The IRS' proposal would have allowed charities to forego sending written acknowledgment letters (which generally state the amount of the contribution made and whether any gifts or services were received by the donors) and instead submit an information return to the IRS, listing each donation received by the charity and certain information regarding each donor, including the donor's social security number.
Under the proposal, the information returns would be submitted to the IRS by the charities and uploaded to an IRS' database. The IRS would then have been able to search the database using a donor's social security number in order to substantiate charitable deductions questioned during an IRS audit.
The proposal faced stern kickback due to identity theft concerns and the burden that would be placed on charities to ensure donors' social security numbers were adequately protected. Commentators were also concerned that requiring charities to collect donors' social security numbers would curb donations.
The proposal's withdrawal means that charities must still substantiate donors' charitable contributions by providing donors with written acknowledgment letters. Depending on the size of a donor's contribution, the donor may not be able to lawfully claim a charitable deduction for the contribution unless the donor receives the written acknowledgment letter from the charity. For more information on written acknowledgment letters, please see our previous post.
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