Swerving Away from an Audit: Red Flags to Avoid when Doing Charity a Favor

CarYou wake up one day feeling fantastic and then you thought, “Hey, it’s a beautiful day to help others.”

You visit one of your garages and quickly noticed that one of your rides is now on its crowning age, but you don’t have the time to drive it anymore. And the thought of donating it suddenly rushed in.

So, you picked up the phone and went ahead to donate your car. But come the auditing season, you find that the IRS is already on your tail.

Now, did the IRS folks just randomly pick you? Well, probably not.

But, to be sure you did not violate any tax-related laws when you made a donation, DonateACar.com shares some good-to-know red flags to watch out for.

Typos and Honest Information Errors

If the numbers you submitted don’t match what the IRS has on file, it raises a question. Even if your car donation passed through professional accounting and third-party “fixers,” you should still review the information to avoid any trouble.

Large Charitable Contributions

The act of helping others out by donating generous amounts doesn’t make them a category for an IRS flagging. But, when you lack the legal documents, especially if the charity you engaged with has no proper documentation and filing, your good intentions can look foul to the IRS. Always keep your legal documents close.

High Salary and Purchase Profile

Be wary of an audit, especially when you make sudden decisions such as donating your car. To the IRS, when a financial decision doesn’t amount to logic; for example, you donated a car and then you bought a brand-new one — you’re a clear target for investigation.

A Drop in Income and Sudden Increase in Donation

They say it’s easier to give when you’re in the process of sorting things out. But, when you’re going to donate something while you’re caught up in a financial challenge, then that is an IRS textbook definition of taking advantage of the deduction system. As a rule of thumb, make donating a habit, not a coping mechanism for stress.

There are times when a good act becomes clouded by the laws. But, if you helped others out with the best of intentions, then there’s nothing to worry about.