Are you are a volunteer for a fundraising event?
Did you know that running a charity auction at your event can get you into a lot, (and I do mean a lot) of tax trouble?Why?
- Donated goods transactions, particularly in Canada, are rife with fraud. This makes CRA understandably grumpy. This leads to point #2
- It is really hard to tax receipt that donated bottle of wine (or donated anything) properly under Canada Revenue Agency (CRA) guidelines.
- Many charities tax receipt donated goods wrong just out of plain pig ignorance. This also makes CRA legitimately cranky.
- Some donors think that the amount they spend on a charity auction item is tax receiptable. They are wrong. It is not.
- Some charities will incorrectly issue a tax receipt rather than annoy a donor. Just because someone is complaining doesn’t mean they know tax law. This is a bad idea. See Points #1, 3, & 4.
Bottom line is an item that raises $1000 at your auction may lead to an audit, or worse, by Canada Revenue Agency.
If you still want to do a charity auction, you absolutely should. Just be sure you avoid tax receipting trouble spots.
Fine print. I am not a lawyer or accountant, certainly not a charity tax lawyer or charity tax accountant. Check with a charity tax lawyer or charity tax accountant (and not just your friend who happens to be a lawyer but specializes in mergers and acquisitions) for actual advice.
I learned much of this from Mark Blumberg. Any errors are mine, not his.