I’m no expert, but I think they
might well at least have to file an amended tax return for the year of the
donation, especially if it was any sizeable amount. I seriously doubt you could
give that kind of money back without some tax adjustment. Clearly you need to
call the IRS on this one. In my experience they are usually very
accessible (start with your phone book), very nice, and very helpful.
State tax is also a consideration in states
that have income taxes, but charitable donations rules are probably are based
on federal returns.
Lucy Sperlin
From:
Sent: Wednesday, January 18, 2006
4:30 PM
To: [log in to unmask]
Subject: Re: Return of monetary
gift and the IRS
Good question. I can't see how they
would/could be penalized. That was a valid charitable contribution for that tax
year. Your organization has held that funding since then. This also is an
amount of time for which their money, had it not been donated could have been
earning interest or invested (and taxed).
Unless you provide them with a 1099 or
whatever IRS filing form may be required (if one is), the return of their
donation will not be subjected to tax or penalty because obviously it cannot be
considered as income.
I would also consult with your State's
Attorney General's office regarding the refunds.
Pam
In a message dated 1/18/2006 5:50:23 P.M.
Eastern Standard Time, [log in to unmask] writes:
Hopefully some kindly member of the list can point me in the right
direction.
We have a dozen or so individuals who donated money (some a few hundred
dollars, one gift around $2000) for a specific project (it was in the
early planning stage when the money was given), and that project has
just been canceled for a number of reasons (it never went beyond
planning). Since the money was given for a specific purpose we're going
to write to the donors to let them know that the exhibit has been
cancelled and kindly ask that they allow us to put their donation toward
our other exhibits. If they chose not to do so, we'll give their
donation back-but (there's always a but) I am 99.999% certain that if
they took a tax deduction (most likely on their 2004 return) for their
gift, they will take a penalty upon the return of that gift. I did a
quick search of the IRS's website and couldn't find anything relating
directly to this topic. Would anyone be able to provide me with some
specific language on this matter? Has anyone else out there had a
similar situation?
Thanks in advance!