Donated thousands to charities this year? Don't get burned by invalid receipts
As tax season draws nearer, you may have noticed an influx of donation receipts arriving in the mail. While there is no official deadline for charities to issue receipts, the Canada Revenue Agency suggests that they be issued by the end of February.
A valid donation receipt is vital to being able to claim a donation credit on your return. For a receipt to be valid, it must contain both the name and address of the charity, its charitable registration number, a serial number, a date, the full name and address of the donor, along with the amount donated and the signature of a charity's officer or director.
A recent tax case involving a Quebec couple trying to defend nearly $7,000 of charitable donations made in 2011 shows just how critical having an official receipt is to making a valid claim.
The couple was involved in providing relief to a Haitian school through the auspices of a Quebec-based charity. When the husband flew to Haiti in 2010 as a volunteer to help build a camp for disaster victims following the earthquake, he received a donation receipt from the charity for 2010.
In 2011, the couple travelled again to Haiti, and spent nearly $7,000 on medicine, new textbooks, student enrolment and uniforms, and food and supplies for a year-end party for the children and staff at the school.
But some time in 2011, the relationship between the charity's president and the couple deteriorated "because of numerous irregularities observed, that is, apparent theft, fraud, breach of trust and misappropriation of funds," which the couple ultimately reported to the charity's board. This dispute ultimately led to the failure of the couple to obtain a charitable receipt from the charity for their 2011 charitable expenditures in Haiti.
While the school itself issued receipts with the school's official stamp for some of the expenses, "most of [the expenses] had been paid in cash" and no receipts were available.
The tax court judge reviewed the receipts submitted in court and concluded that the receipts and other documents submitted by the couple "do not meet the explicit requirements of the [Tax Act]. The failures to comply are significant and multiple."
For example, the receipt for the purchase of the textbooks does not state that it is an official receipt for income tax purposes nor does it indicate the charity's CRA official registration number. This holds true for the receipts for the children's party, the child sponsorships and the school uniforms.
The judge was sympathetic, saying, "I have no doubt whatever that the [couple] ... visited Haiti ... for humanitarian purposes ... and I have every reason to believe that they actually did incur the expenses claimed for charitable purposes; [however], the problem lies in the fact that the [couple] did not provide any 'official receipt' containing the information required."
The judge went on to explain that the purpose of the charitable-receipt requirements is "to avoid abuses of any kind. They are the minimum requirements for defining the authenticity of a gift that can qualify the taxpayer making it for a tax deduction. The Court has no discretion to disregard the requirements of the Regulations."
For taxpayers who want to help victims of a disaster, the CRA provides a useful list of questions to ask on charities, here( http://www.cra-arc.gc.ca/chrts-gvng/dnrs/rcpts/dntn4-eng.html).