IRS Answers Questions about Virtual Currency Donations
The two new questions and answers are:
Q35. When my charitable organization accepts virtual currency donations, what are my donor acknowledgment responsibilities? (12/2019)
A35. A charitable organization can assist a donor by providing the contemporaneous written acknowledgment that the donor must obtain if claiming a deduction of $250 or more for the virtual currency donation. See Publication 1771, Charitable Contributions Substantiation and Disclosure Requirements (PDF), for more information.
A charitable organization is generally required to sign the donor’s Form 8283, Noncash Charitable Contributions, acknowledging receipt of charitable deduction property if the donor is claiming a deduction of more than $5,000 and if the donor presents the Form 8283 to the organization for signature to substantiate the tax deduction. The signature of the donee on Form 8283 does not represent concurrence in the appraised value of the contributed property. The signature represents acknowledgment of receipt of the property described in Form 8283 on the date specified and that the donee understands the information reporting requirements imposed by section 6050L on dispositions of the donated property (see discussion of Form 8282 in FAQ 36). See Form 8283 instructions for more information. (12/2019)
Q36. When my charitable organization accepts virtual currency donations, what are my IRS reporting requirements? (12/2019)
A36. A charitable organization that receives virtual currency should treat the donation as a noncash contribution. See Publication 526, Charitable Contributions, for more information. Tax-exempt charity responsibilities include the following:
- Charities report non-cash contributions on a Form 990-series annual return and its associated Schedule M, if applicable. Refer to the Form 990 and Schedule M instructions for more information.
- Charities must file Form 8282, Donee Information Return, if they sell, exchange or otherwise dispose of charitable deduction property (or any portion thereof) – such as the sale of virtual currency for real currency as described in FAQ #4 – within three years after the date they originally received the property and give the original donor a copy of the form. See the instructions on Form 8282 for more information. (12/2019)
These questions are in addition to existing questions 33 and 34, which are relevant to those making donations of virtual currency. You can read the full list of FAQs on the IRS website.
If your organization accepts virtual currency donations or is considering doing so, please contact us with any questions or to discuss the potential tax implications.
We also encourage all nonprofit organizations to create a gift acceptance policy and review and update it periodically. This will help you navigate contribution considerations and address any concerns before they become issues.
Check out our article on Elements of a Well-Drafted Gift Acceptance Policy to learn more.