G I T I H
I N I T U
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When cheerful giving comes with a price. b y K aren S tiller
od may love a cheerful giver, but cheerful generosity can raise eyebrows at the IRS. Susan Brown, 55, of Cincinnati, Ohio, suspected that the IRS would come knocking at her door sooner or later. “Years ago, when I became a believer,” says Brown, “I made a decision that I would tithe.” Although literal tithing — giving away 10 percent of one’s income — is considered the theoretical goal among Christians, statistics show that most Christians hit closer to the 2 or 3 percent mark in their charitable giving. But Brown didn’t stop at 10 percent. Her church encouraged its members to drive a lifestyle stake in the ground, setting aside any income they earned above what they needed to maintain that lifestyle as money to give back to God. “I decided that every year I would add another 1 percent to my giving,” she explains. “By 2005 I was around 20 percent of my income.” And up it went from there. Then came the audit. Richard Westley of Lake Ridge,Va., retired from the IRS last year with 39 years of service, which included overseeing countless audits. He’s not surprised to hear of Brown’s audit. “It’s almost a given if the donations are that high,” he explains. “There is a scoring system that is based on income in relation to deductions. The higher the score, the higher the chances for an audit.” The very word sends shivers down the most financially savvy spine. The scoring system, explains Westley, is “a secret formula. It’s like Coca-Cola — no one will release it, but everyone knows it is there.” What’s not a secret are the relatively painless steps that help the audit go as smoothly as possible.
Follow the rules “I’d only be terrified,” says Westley, “if I knew I had cheated.” This makes sense, but to follow the rules, you must know them. The website of the IRS (IRS.gov) has all the information you need, presented in a surprisingly (given most people’s fears of such things) clear and user-friendly fashion. Check out especially “Ten Tips for Deducting Charitable Contributions,” which even comes with a video clip. Remember that the rules do change, so refresh your knowledge every now and then. A basic starting point is that if you’re going to claim a contribution it must be to an organization that is a registered charity.You can check at the IRS website to see if a charity is registered. And charities can make things easier for their donors by issuing proper receipts which must state that no goods or services were received in exchange for the gift. Smaller or newer organizations sometimes need to be reminded of that requirement.When Dick Towner, 71, of Chicago, was audited,
the IRS sent back a number of his receipts that did not have that statement. “The organizations weren’t up to snuff as to what they needed to give to their donors,” explains Towner. Another potential problem area is determining the value of donated goods. Mike Detroy, 63, of Cincinnati, was audited in 2008 because of his higher-than-average charitable giving. He doesn’t even try to claim donations for “non-cash contributions of stuff ” like clothing or furniture. “There’s no real way to show the value of a dresser,” he says, so he and his wife have decided to skip that potential headache. Richard Westley points out that a common mistake in claiming non-cash contributions like art, vehicles, and clothing is that the donor tends to over-estimate the value of the item. The IRS has its own internal assessment process. “Two people may see a different value,” says Westley, who suggests that if you are going to claim the donation of goods, obtain a second documented opinion of its value to provide more back-up.With things like real estate, cars, stocks, and art, “the documentation becomes a lot more critical, because it’s not as straightforward.”
Keep the records “Record-keeping, record-keeping, record-keeping. That is really the thing,” says Westley. Jonathan Kopke, 58, of Cincinnati, has been audited twice because of his high charitable contributions. He stresses the importance of keeping everything: receipts, credit card bills, cancelled checks. “Right at the time when the entire banking industry has stopped returning cancelled checks,” says Kopke, “the IRS has started requiring them.” Mike Detroy, 63, of Cincinnati says that obtaining printouts of things like checks and bank statements usually requires prompt attention, as they may be online only for a short time. “I try to be hyper-organized,” says Detroy. “If we have a contribution through a credit card, I highlight that on the statement and clip that to the receipt.” Auditing alumni also recommend printing off the website home page of the organization and adding that to the paperwork. Dick Towner numbers his receipts and keeps his charitable giving recorded on an Excel spreadsheet. “It’s nice to know that if I’m audited, I’m ready.”
The big meeting “We went in determined to be pleasant,” says Mike Detroy of the face-to-face appointment to go over his charitable giving records with the IRS. “I’m for catching tax cheats. The IRS representative didn’t have an axe to grind with me.” Everyone interviewed for this story applauds the IRS for being thorough in their investigations. “I think it’s legitimate on the IRS’s part,” says Dick Towner, “that if somebody says
they are giving away 30 to 40 percent of their income, it would raise a red flag.” Their best advice for those whose audit is yet to come: Bring in more than enough information and documentation, and be as warm and pleasant as possible. Richard Westley confirms that a good attitude goes a long way. “Be cooperative. If you’re the auditor and sitting across the table from someone helpful, it’s a lot easier than when someone is blowing cigar smoke at you. I’ve had that happen, and when that happened, I dug deeper and deeper into that
Streamline your giving Jeffrey Chinery of Everyday Steward, a division of Ronald Blue & Co., the financial/investment consulting firm whose services are based on biblical principles, suggests using donor-advised funds to streamline your giving and record-keeping. Donor-advised funds are nonprofit organizations that collect your annual giving, issue a single receipt for your charitable gifts, and then allow you to designate specific amounts to specific recipients. Donor-advised funds can also easily facilitate the giving of non-cash assets such as mutual fund stocks. “Ron Blue recommends the National Christian Foundation (NationalChristian.com),”explains Chinery, “but there are other donor-advised funds out there. The benefit to you as the giver is that it’s easy to substantiate your giving.You can request that part of your money go to your church, another part to another nonprofit — or 25 different nonprofits. You still have only a single receipt to keep track of.” If you don’t see your favorite nonprofit on the fund list, you submit a request, the fund will research it, and, if it’s legitimate, will add it to their list.
It’s all Ron Sider’s fault! “Anyone who follows Ron Sider’s advice for graduated tithing is probably going to be audited,” says Jonathan Kopke with a laugh. The advice he refers to is in Rich Christians in an Age of Hunger, chapter nine in the latest edition. Sider presents the graduated tithe as “one of many models that can help break the materialistic stronghold.” At its essence, the graduated tithe involves settling on a base figure of livable income from which an individual or family will tithe 10 percent. For every $1,000 above that figure (which can be adjusted up or down to changing circumstances, of course), you give an additional five percent. Sider recommends the following five steps for anyone considering a graduated tithe:
return to find something.You want to be treated as they would like to be treated.” Susan Brown viewed her one-on-one with the IRS as an opportunity to share her faith.“I explained that I’d been given so much, and I had made the decision to limit my lifestyle, and I wanted to be generous,” she recalls. Dick Towner did the same thing. “I didn’t go in wearing that on my sleeve, but, inevitably, you can see the kinds of charities I am giving to.You can effectively speak to what has motivated you to be that generous.” The second time Towner was audited it actually worked to his favor. “They found an extra $800 donation that I hadn’t claimed, so I ended up getting more back,” he says.
•D iscuss the idea with your whole family so that everyone buys in. • At the beginning of the year, put it in writing. Work it out on paper so you know exactly where you are headed. •D are to share your pledge with another Christian couple or individual who can encourage you as you go. • Discuss any major spending with that same person for built-in accountability.
A blessing in a most excellent disguise
•R evisit your pledge each year to see if you can lower your base figure and expenditures, and thereby increase your giving.
For some of the donors in this article, their audit experience was a one-time event that involved organizing paperwork and meeting for less than an hour. For others, audits have happened more than once and involved lost paperwork and frustrations with bureaucratic fumbling. Some meetings can drag on for hours. In the end, however, “We feel blessed, as they used to
And of course, keep scrupulous records. You just might need them.
“I tell you, love your enemies. Help and give without expecting a return. You’ll never—I promise—regret it. Live out this God-created identity the way our Father lives toward us, generously and graciously, even when we’re at our worst. Our Father is kind; you be kind.”
Want to be more generous? In The Treasure Principle: Unlocking the Secret of Joyful Giving (Multnomah,2005), Randy Alcorn explores a simple yet profound truth that challenges the stereotypes of stewardship. Alcorn illuminates the liberating joy of giving and its impact, not only for today but for eternity as well.
Jesus (Luke 6:35-36; The Message)
say, ‘to be a blessing,’” says Mike Detroy. “I can’t imagine living any other way,” agrees Jonathan Kopke. For these donors the inconvenience of an audit is nothing compared to the joy they receive from living a life of extraordinary generosity. “I give these people a lot of credit,” says Richard Westley, “to be able and willing to give that much.” n
In Generous Living:Finding Contentment through Giving (Zondervan, 1997), Ron Blue challenges and encourages Christians to live generously, addressing such topics as why it’s better to give than to receive, teaching children to give, how to give away money wisely and strategically, and how to make a will.
Karen Stiller is a freelance writer and editor based in Port Perry, Ont., Canada.
Healing from the Inside Out continued from page 29. I have witnessed more than a few miraculous healings, both spiritually and physically. God can change our hearts in an instant if we are willing and he is ready. Many of my colleagues in forgiveness research believe that “forgiveness is not a simple solution; the development of positive emotional, cognitive, and behavioral changes following an offense takes time and effort.”6 And while it can indeed take time and effort, time and effort are not the most important ingredients to forgiving. Motivation is the most important factor. Our faith can and should motivate us to want to forgive. The “gift” of cancer and other serious illnesses is that they can bring people face-to-face with their emotional pain, offering an opportunity to confront the past and seek healing of the heart, which can then profoundly affect our physical condition as well. Millennia ago, Aristotle wrote these deeply profound words: “The best friend is the man who, in wishing me well, wishes it for my sake.” Is it possible to reach the emotional plateau
where we can truthfully offer well-wishes to those who have hurt us? n Michael S. Barry is a graduate of Princeton Theological Seminary and received his doctorate from Fuller Theological Seminary. He has authored three books about spirituality and health, particularly as it relates to cancer patients: A Reason for Hope, A Season for Hope, and The Art of Caregiving, all published by David C. Cook. He is currently working ohn a book called Let It Go! Stories of Cancer, Forgiveness and Healing from the Inside Out. He is director of pastoral care at Cancer Treatment Centers of America in Philadelphia. If you are interested in learning more about their short-term forgiveness intervention program, you may contact Dr. Barry at email@example.com. (Editor’s note: due to space limitations, the endnotes for this article have been posted at esa-online.org/Endnotes.)