The Tax Man's Hand Reaches For the Collection Plate

On most weekdays, before morning and evening prayers, Barry Picker places $1 in a pushke, or box for charitable giving, at a synagogue he attends on Avenue J in Brooklyn. Mr. Picker, 53, takes a small deduction for those donations on his income tax returns each year.

A new federal income tax statute renders those deductions illegal. In years past, taxpayers could estimate the amount of donations of less than $250 that they put in a pushke, a church collection plate, or give as a Sikh temple offering. Beginning with 2007 tax returns, a paper trail of that giving — to religious institutions and other nonprofits — is required.

"This is going to impact religious organizations more than any other charity, because they are the biggest recipient of small, cash donations," Mr. Picker, a certified public accountant, said. "We've joked about someone coming around in synagogue, and giving out receipts, but usually there's no one there to do it."

Until this year, taxpayers, when audited, were asked to present cancelled checks, or explain the nature of their cash gifts for which they have no receipt. Now, an explanation is no longer insufficient, regardless how small the contribution. Given the increased scrutiny, the new rule may cause taxpayers think twice about claiming deductions for undocumented donations.

"There are still people who will insist on putting it down, who will say, ‘Let the IRS come and audit me,'" Mr. Picker, who practices in Brooklyn, said.

At Saint Jean Baptiste, a Catholic church on the Upper East Side, major donors are careful to document their largesse, the Reverend Anthony Schueller said. "I think it will probably affect the smaller, spontaneous donor, who might not give as a result," he said. "Probably, there will be more planning on the part of those donors. What they're not giving spontaneously may be compensated for with a larger gift given once a year — rather than on a passing basis."

The new law may give Catholics incentive to place their weekly collections in special envelopes sent home monthly to registered parishioners, a spokesman for the Archdiocese of New York, Joseph Zwilling, said. Donations placed in those envelopes are totaled, and a receipt is generated. "Too many people show up at church, throw a dollar or two into the basket, and think it's sufficient," he said. "It really isn't."

Mr. Zwilling said the archdiocese has no plans to generate on-the-spot donation documentation for those placing cash in collection bins, or poor boxes — and that he doubts most parishioners will expect such receipts. "I would personally be surprised if that person putting $1 or $2 or $5 in a poor box asked for a receipt," he said. "It's usually thought of as an anonymous contribution for those in need."

A partner with VB&T Certified Public Accountants in Midtown, Frank Van Buren, said that when it comes to small, undocumented donations, he would decide on a case-by-case basis whether to allow clients to take deductions. "If someone tells me they donate $10 a week — $500 a year — to the church, I'll let them take the deduction if it seems reasonable" he said. "If I think it's frivolous, I won't touch the return."

Presbyterian churches will make every effort to provide congregants with receipts for donations made on a collection plate, or in charity boxes, an associate in stewardship and mission funding for the Presbyterian Church U.S.A., Christie Neagle said. "If someone asks for a receipt, they'll certainly get a receipt," she said, noting that paperwork would be drawn up on an honor system. Yet Ms. Neagle said tax deductions aren't what drive most churchgoers — and that she doubted many people would be asking for documentation.

While it's common practice to make a $1 offering upon entering a gurdwara, or Sikh temple, a spokesman for the Sikh Coalition in New York, Amardeep Singh, said the new rule was likely to have little impact in the community. "It's such a nominal amount — I've never thought of it as a tax deduction," he said. "As far as I know no one as ever asked for a receipt. Those who want a tax deduction write checks." It is still too early in the year to determine the effect on poor box offerings at St. James' Episcopal Church on the Upper East Side, its parish manager, John Scibilia, said. He said he would be surprised to see those donations drop off significantly. "I think people who want a tax deduction are relatively conscious about getting receipts," Mr. Scibilia said. "Those giving smaller gifts of $5 or $10 in church are probably not thinking, ‘Will I be able to deduct this from my taxes?' but ‘Will this person be able to eat tonight?'"