Q&A: Losing Church Records

Our church lost this year’s contributions records—what should we do?

Our church bookkeeper accidentally deleted all of the contributions records on our church computer for the past year. Does this mean that our donors will not be able to deduct contributions they made to our church?

Not necessarily. Consider the following points:

1. The first thing you should do is have a computer technician examine your computer to see if the contribution records can be recovered. This is often possible.

2. The good news is that most members will not be directly affected. Here’s why:

Only 30 percent of taxpayers itemize deductions on Schedule A, and so 70 percent get no tax benefit from making charitable contributions (these persons are not affected by the church’s loss of giving records).

Donors can substantiate individual cash contributions of less than $250 with a bank record (a statement from a financial institution, an electronic fund transfer receipt, a canceled check, a scanned image of both sides of a canceled check obtained from a bank website, or a credit card statement) showing the charity’s name, date of the contribution, and the amount of the contribution, or (2) a written communication (including “electronic mail correspondence”) from the charity showing the charity’s name, date of the contribution, and the amount of the contribution. Many donors make contributions by check and they will have a bank record that can be used to substantiate their contributions of less than $250. Also, note that many churches provide written acknowledgments to donors on a periodic basis (i.e., quarterly) that provide a summary of their contributions. These records can be used by donors to support at least a partial charitable contribution deduction if the church’s contribution records are inadvertently deleted.

Individual contributions of $250 or more must be substantiated with a written acknowledgment from the church that meets certain requirements. Canceled checks or other bank records may not be used. Many churches provide donors with contribution summaries periodically (i.e., quarterly), that in some cases can be used to support at least a partial charitable contribution deduction if the church’s contribution records are inadvertently deleted. This assumes that a written acknowledgment can be constructed that meets the requirements of the tax code.

If a church inadvertently loses its records, through a computer mistake, natural disaster, fire, etc., the IRS permits the amount of a deduction to be reconstructed by any reasonable means. This means that in some cases periodic contribution statements for a portion of the year can be used to reconstruct a reasonable estimate of annual contributions.

Only one percent of individual tax returns are audited by the IRS, so the chance of someone in your church having his or her tax return selected for audit is low. Even if a member’s return is audited, the audit may address issues other than charitable contributions.

3. In the future, be sure to regularly back up data, and store copies at an off-site location!

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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