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Donations Ethereum and Bitcoin: Tax deductibility and revenue
As a volunteer for a tax exempted organization in the United States, you are probably familiar with the complexities of accepting and processing cryptocurrency donations. One of the most common questions is whether these donations can be deductible from taxes and whether it is necessary to receive receipt.
Donations deductible of taxes: understanding of donations bitcoin
In general, donations made to a US tax executing organization are deductible from tax in accordance with section 501 (C) (3) of the Code of Internal Income (IRC). This means that donors can request a charitable deduction to the fiscal declaration for the contributions they make to qualified organizations. However, cryptocurrency donations are a relatively new and complex field of fiscal law.
Section 170 Donations: Traditional Rule
In 2014, IRS issued guidance (notification 2015-56) that clarifies that section 170 (charitable trusts and gifts) applies to certain types of charitable contributions, including those made in cryptocurrency. According to this rule, donors can deduce their cripporrency donation as a qualified charitable contribution if they meet specific requirements:
- The donor must be a tax exempted organization.
- The donor must have kept cryptocurrency for at least 12 months before making the donation.
- The donor must detail the deductions in Annex A of Form 1040.
Bitcoin donation rule: Special considerations
In response to increasing the public interest for cryptocurrencies and charitable dedication, IRS has issued additional guidance (notification 2019-41) that addresses the fiscal treatment of cryptocurrency donations. According to this rule:
- Donors can deduce their criptocurrency donation as a qualified charitable contribution.
- The donor must have kept cryptocurrency for at least one year before making the donation.
- The donor must keep cryptocurrency records, including its fair market value.
Issue of receipts
While donors are not obliged to issue receipts for their cryptocurrency donations, it is essential for your organization to provide documentation and recognition in different ways. Some options include:
- Confirmation letters : Send a thank you letter or confirmation to the donor confirming the receipt of their donation.
- Digital receipt : Create a digital receipt that can be shared with the donor by E -mail or online portal.
- Declaration of charitable deduction : Include a statement on form 8288 (non -cash charitable contributions) indicating that you have issued a charitable deduction for cryptocurrency contribution.
The consequences of not issuing receipts
Failure to comply with the receipts or the provision of documentation in accordance with IRS regulations can lead to penalties, fines and audits. In addition, donors may not be able to claim their donation as a qualified charitable contribution if they do not receive the proper recognition.
best practices for issuing Bitcoin donations: A step -by -step guide
- Understand your organization’s policies : Review your organization’s guidelines on cryptocurrency donations to make sure you follow the IRS regulations.
- Determine the type of donation : Decide if a donor can deduce the contribution of cryptocurrencies as a qualified charitable deduction, in accordance with section 170 or the rule of Bitcoin donation.
- Keep records : Keep exact and detailed records of the cryptocurrency transaction, including its fair market value and any documentation provided to the donor.
- Issuing of receipts : Create a receipt that includes essential information (for example, the name of the recipient, the name of the organization, date) and provide it to the donor.
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