Auctions have long been lucrative fundraising events for not-for-profits. But these events come with some tax compliance responsibilities.<\/p>\n
Acknowledging item donations<\/strong><\/p>\n If you auction off merchandise or services donated to your charity, you should provide written acknowledgments to the donors of the auctioned items valued at $250 or more. You won\u2019t incur a penalty for failing to acknowledge the donation, but the donor can\u2019t claim a deduction without substantiation, which could hurt your ability to obtain donations in the future.<\/p>\n Written statements should include your organization\u2019s name and a description \u2014 but not the value \u2014 of the donated item. (It\u2019s the donor\u2019s responsibility to substantiate the donated auction item\u2019s value.) Also indicate the value of any goods or services provided to the donor in return.<\/p>\n Other rules<\/strong><\/p>\n Donors of services or the use of property may be surprised to learn that their donations aren\u2019t tax-deductible. Alert these donors before they make their pledges. Also inform donors of property such as artwork that tax law generally limits their deduction to their tax basis in the property (typically what they paid for it).<\/p>\n If you receive an auction item valued at greater than $500 \u2014 and within three years sell the property \u2014 you must file Form 8282, \u201cDonee Information Return,\u201d and provide a copy to the original donor. Form 8282 must be filed within 125 days of the sale.<\/p>\n