July 2, 2009 | Read Time: 1 minute
The U.S. Government Accountability Office, Congress’s watchdog unit, has released a report on the “misreporting” of cash contributions to charities by individuals on their tax returns.
In 2001, an estimated 46 percent of taxpayers who deducted cash contributions misreported their deductions, the agency said.
“About 79 percent of misreporting taxpayers overstated a total of $16-billion in contributions while about 21 percent of misreporting taxpayers understated a total of $2.2-billion in contributions.”
In 2008, the IRS examined about 175,000 taxpayers “who potentially misreported cash contributions, out of about 1.4 million individual taxpayers it examined that fiscal year, and adjusted cash-contribution amounts by $593-million in net terms,” the agency said.
The report noted that one approach the government takes to get more-accurate reporting by taxpayers on other parts of their returns is through “information reporting.” Third parties, such as employers or banks, file returns with the IRS and taxpayers that provide information on a variety of taxpayer transactions, the agency said.
The IRS then “tries to match information from returns filed by third parties against taxpayers’ income tax returns to see if taxpayers have filed returns and reported all their income,” the agency said. “Currently, information reporting is not required for cash contributions to charities.”
But the agency said that requiring information reporting for charitable cash contributions may not be an effective way to encourage more people to comply with the law.
“Charities could incur substantial costs and burdens if they were required to file information returns with IRS and taxpayers on the cash contributions they receive,” the agency said.
The report is available at http://www.gao.gov/new.items/d09555.pdf.
