IRS and charitable contribution rules: no you don't have to provide your SSN

We’re often cautioned – correctly – to be protective of our Social Security numbers because if they fall into nefarious hands it’s a major contributor to identity theft, including the filing of fraudulent tax returns resulting in refunds going to someone other than you.

That’s what made last September’s Internal Revenue Service “voluntary” proposed rules on charitable organizations and donors’ Social Security numbers so…problematic. It would have allowed charitable organizations to avoid the “contemporaneous written acknowledgement” (CWA) of gifts equal to $250 or more, by instead collecting taxpayer name, address, and social security number and then reporting those items along with the gift amount to the IRS. The proposal was followed by a public comment period.

It’s important that charitable organizations – particularly those aware of the IRS’s original rules pitch – know the outcome. Charitable Organizations do NOT need to collect social security numbers from donors. The IRS proposed in Sept. 2015 new rules for charitable organizations that would have made it “voluntary” for charities to obtain Social Security numbers from their donors. The charitable organizations would then forward the numbers on to the IRS.

The rules, it said, were being offered up for comment because, “The collection of information is necessary to properly substantiate charitable contribution deductions under the exception to the general requirements for substantiating charitable contribution deductions of $250 or more.”

However the swift, sizable, and decisive reaction from the public and charitable organizations caused the IRS to experience an old Washington maxim: when I feel the heat, I see the light. More than 38,000 comments were received, and in the tumult the IRS thought better of its voluntary suggestion. The reaction from charitable organizations was irrefutable: not only does this make our administrative problems more difficult, it endangers our donors.

Charities were concerned about several things. One was the amount of money they’d have to spend on putting security protections in place to safeguard themselves from hackers and thieves who might break into their systems and make off with their donors’ sensitive information. There was also the liability charitable organizations might face if their data was stolen. Another was that donors, knowing their information was being transferred from recipient to recipient, would be less likely to make the contributions that constitute the lifeblood of charitable organizations.

The IRS’s motivation is understandable: it wished to make it easier on itself to verify the veracity of a claimed tax-deductible donation. However, the avalanche of indignation reached the stage at which on Jan. 8 the IRS threw up its hands and said, okay, we surrender.

“The Treasury Department and the IRS received a substantial number of public comments in response to the notice of proposed rulemaking. Many of these public comments questioned the need for donee reporting, and many comments expressed significant concerns about donee organizations collecting and maintaining taxpayer identification numbers for purposes of the specific-use information return. In response to those comments, the Treasury Department and the IRS have decided against implementing the statutory exception to the CWA requirement, and therefore that exception remains unavailable unless and until final regulations are issued prescribing the method for donee reporting. Accordingly, the notice of proposed rulemaking is being withdrawn.”

So, that’s the story. The IRS relented. It was hot out there.



Tagged Featured, IRS, Not For Profit, Rodefer Moss