April 5, 2007 | Read Time: 1 minute
More than 100,000 taxpayers may have cheated the government of as much as $1.8-billion worth of revenue last year by claiming improper deductions on their income-tax returns for donations of goods and property to charity, according to a report released last month by the Treasury Department’s inspector general for tax administration.
The inspector general’s office came up with that estimate after reviewing a sample of 211 returns that claimed large deductions for noncash charitable gifts.
The office found that 24 percent of the taxpayers who donated items that they said were worth between $5,000 and $500,000 failed to document the value of their gifts as federal law requires. Nineteen percent of those who donated items worth more than $500,000 failed to attach documentation.
The inspector general said the Internal Revenue Service should develop a way to identify returns that lack the required documents.
The report prompted a key senator to urge the IRS to move quickly to crack down on people who can’t prove the value of the items they donated to charity.
“Honest taxpayers shouldn’t have to shoulder the burden of those who want to play fast and loose with the tax laws meant to encourage charitable giving,” said Sen. Charles E. Grassley, an Iowa Republican who has been leading investigations into charity wrongdoing and helped write a law last year designed to curb tax abuses by charities.
A copy of the report (Reference Number 2007-30-049), is available online.
