Contributions of Motor Vehicles, Boats, and Airplanes
Form 1098-C, “Contributions of Motor Vehicles, Boats, and Airplanes,” is a tax form used by charitable organizations to report the donation of motor vehicles, boats, and airplanes to the Internal Revenue Service (IRS). It’s an important form for both the charitable organization and the donor, especially if the donor intends to claim a tax deduction for the donation. This form is part of the 1099 series, which are used to report various types of income that individuals may receive throughout the year other than salary from an employer. It is an essential document for tax reporting purposes, ensuring that interest income is correctly reported to the IRS.
Per the IRS, use Form 1098-C to report:
Each contribution of a qualified vehicle that has a claimed value of more than $500. A qualified vehicle is:
- Any motor vehicle manufactured primarily for use on public streets, roads, and highways.
- A boat.
- An airplane.
- Why do you need to file a 1098-C?
- Who needs to file a 1098-C?
- Are there any exemptions to filing a 1098-C?
- What is the deadline for filing a 1098-C?
- What is required to file a 1098-C?
- What are the penalties for 1098-C?
- Do you need to e-file a 1098-C?
- Is state filing required for the 1098-C?
- What elements make up a 1098-C form?
- Can you correct a 1098-C?
Why do you need to file a 1098-C?
Form 1098-C, “Contributions of Motor Vehicles, Boats, and Airplanes,” is required to be filed by charitable organizations to provide documentation and reporting of certain types of charitable contributions they receive. Here’s why the 1098-C is necessary:
For the Charitable Organization
- IRS Reporting Requirement
- Charitable organizations are required to report the receipt of a motor vehicle, boat, or airplane if the claimed value of the item exceeds $500. The 1098-C form serves this purpose.
- Provide Accurate Details
- The form captures specifics about how the organization used the donated item (e.g., was it sold, was it used in the organization’s operations, or was it improved upon) and what the donor can claim as a tax deduction.
- Avoid Penalties: Filing the 1098-C ensures the organization meets its IRS reporting obligations and avoids potential penalties for non-compliance.
For the Donor
- Claiming Tax Deductions
- If a donor wishes to claim a tax deduction for their donation, they will need a copy of Form 1098-C from the charitable organization as proof of their donation and its value. The IRS requires donors to have this form to support their tax deduction if the claimed value of the donation exceeds $500.
- Determining Deduction Amount
- The allowable tax deduction can vary based on how the charitable organization uses or sells the donated vehicle, boat, or airplane. The 1098-C provides essential details that the donor needs to determine the correct amount they can claim as a deduction.
For the IRS
- The 1098-C allows the IRS to verify that individuals are accurately reporting and claiming deductions related to vehicle, boat, or airplane donations on their tax returns.
- Ensure Compliance
- The form ensures that charitable organizations are transparent about significant charitable contributions they receive, fostering proper reporting and compliance with tax regulations.
In summary, Form 1098-C serves multiple purposes. It ensures transparency and accountability in the reporting of significant charitable donations, helps donors claim accurate tax deductions, and assists the IRS in monitoring and verifying tax compliance related to such contributions.
Who needs to file a 1098-C?
Form 1098-C, “Contributions of Motor Vehicles, Boats, and Airplanes,” needs to be filed by eligible charitable organizations that receive qualified vehicle donations where the claimed value of the donation exceeds $500. Here’s a breakdown:
- Any organization that is a qualified donee under the tax code and receives a donation of a motor vehicle (including cars, trucks, motorcycles, and vans), a boat, or an airplane must issue Form 1098-C if:
- The claimed value of the donated vehicle exceeds $500, and
- The organization sells the vehicle, uses it significantly for its operations, or makes material improvements to it.
Not Just Sales
- While many charitable organizations sell donated vehicles and report the gross proceeds from the sale on Form 1098-C, the form is also used when the charity decides to use the vehicle for significant tasks related to its mission or makes major improvements to the vehicle before selling or using it.
- The charitable organization that receives the donation is responsible for completing Form 1098-C and providing copies to both the IRS and the donor. By doing so, the charity provides necessary documentation for donors to claim their tax deductions.
For donors: While they don’t file Form 1098-C themselves, it’s essential to obtain a copy of this form from the charity if they plan to claim a tax deduction for their vehicle donation of over $500. This form is the necessary documentation to support their deduction on their federal tax return.
Are there any exemptions to filing a 1098-C?
Yes, there are specific situations where a charitable organization might not be required to file Form 1098-C, “Contributions of Motor Vehicles, Boats, and Airplanes,” even after receiving a qualified vehicle donation. Here are the primary exemptions:
Donations Valued at $500 or Less
- If the donor’s claimed value for the donated vehicle (car, boat, or airplane) is $500 or less, the charitable organization typically doesn’t need to issue Form 1098-C.
Vehicle for Significant Intervening Use or Material Improvement
- If the charity decides to use the vehicle for a significant purpose directly related to its mission or materially improves the vehicle before selling it, the organization may not need to provide Form 1098-C under the same rules as if they simply sold the vehicle without such use or improvement. However, they would still need to provide the donor with a written acknowledgment detailing the significant use or improvement.
Donated to a Needy Individual
- If the charity donates the vehicle to a needy individual in direct furtherance of its charitable purpose (e.g., giving a car to a low-income individual without charge), then the usual sales reporting rules on Form 1098-C don’t apply. Instead, the charity should provide an acknowledgment to the donor reflecting this purpose.
Vehicles Sold at a Discounted Price to Needy Individuals
- If a charitable organization sells the donated vehicle at a price significantly below fair market value to a needy individual in direct furtherance of its charitable mission, it might not need to file the form under the usual sales guidelines. However, it should provide an acknowledgment to the donor indicating this.
What is the deadline for filing a 1098-C?
The deadline for filing a 1098-C can vary based on the several factors:
Sending to Recipients
- The 1098-C form should be furnished to the recipient by January 31 of the year following the payment year.
Filing with the IRS
- If you are filing on paper, the 1098-C forms should be submitted to the IRS by February 28 (or the last day of February) of the year following the payment year.
- If you are filing electronically, the deadline extends to March 31 of the year following the payment year.
However, if any of these dates fall on a weekend or a holiday, the deadline may be extended to the next business day. Additionally, if you discover an error after the initial filing, there are separate deadlines for corrected forms.
Remember, missing these deadlines can result in penalties, so it’s crucial to stay informed and act timely.
What is required to file a 1098-C?
To file a Form 1098-C, you will need certain information about both the payer (the person or business making the payment) and the recipient (the person or business receiving the payment). Here’s what is required to file a 1098-C:
Information about the Payer (Donee)
- Payer’s Name and Address
- Provide your legal business name and mailing address.
- Payer’s Taxpayer Identification Number (TIN)
- This could be your Employer Identification Number (EIN) or your Social Security Number (SSN), depending on your business structure. If you’re a sole proprietor, you might use your SSN; if you’re a business entity, you’d use your EIN.
- Payer’s Phone Number
- Include a phone number where the payer can be reached.
Information about the Recipient (Doner)
- Recipient’s Name and Address
- Provide the legal name and mailing address of the individual or business receiving the payment.
- Recipient’s Taxpayer Identification Number (TIN)
- This could be the recipient’s Social Security Number (SSN) if an individual or their Employer Identification Number (EIN) if a business entity.
Form specific information
- No form specific data is required, however some information should be added to justify the submission of the 1098-C form. The fields with amounts will vary based on the situation.
What are the penalties for 1098-C?
Please see the penalties section for details.
Do you need to e-file a 1098-C?
Please see the e-file section for details.
Is state filing required for the 1098-C?
Currently, the 1098-C form does not have a place to enter state information.
What elements make up a 1098-C form?
The 1098-C contains several boxes, each designed to report specific types of income or information. Here is a breakdown of the boxes on the 1098-C:
- Box 1 – Date of contribution
- Enter the date you received the motor vehicle, boat, or airplane from the donor.
- Box 2a – Odometer mileage
- The odometer reading in miles. Enter mileage only for motor vehicles in box 2a.
- Box 2b – Year
- Enter the manufacturer year of the motor vehicle, boat, or airplane.
- Box 2c – Make
- Enter the make of the motor vehicle, boat, or airplane.
- Box 2d – Model
- Enter the model of the motor vehicle, boat, or airplane.
- Box 3 – Vehicle or other identification number
- For any vehicle contributed, this number is generally affixed to the vehicle. For a motor vehicle, the vehicle identification number (VIN) is 17 alphanumeric characters in length.
- Box 4a – Donee certifies that vehicle was sold in arm’s length transaction to unrelated party
- If the vehicle is sold to a buyer other than a needy individual (as explained in the instructions for box 5b) without a significant intervening use or material improvement (as explained in the instructions for box 5a), you must certify that the sale was made in an arm’s length transaction between unrelated parties. Check the box to make the certification. Also complete boxes 4b and 4c. Skip this box if the qualified vehicle has a claimed value of $500 or less.
- Box 4b – Date of sale
- If you checked box 4a, enter the date that the vehicle was sold in the arm’s length transaction. Skip this box if the qualified vehicle has a claimed value of $500 or less.
- Box 4c – Gross proceeds from sale
- If you checked box 4a, enter the gross proceeds from the sale of the vehicle. This is generally the sales price. Do not reduce this amount by any expenses or fees. Skip this box if the qualified vehicle has a claimed value of $500 or less.
- Box 5a – Donee certifies that vehicle will not be transferred for money, other property, or services before completion of material improvements or significant intervening use
- If you intend to make a significant intervening use of or a material improvement to this vehicle, you must check box 5a to certify that the vehicle will not be transferred for cash, other property, or services before completion of the use or improvement. Also complete box 5c. Skip this box if the qualified vehicle has a claimed value of $500 or less.
- Box 5b – Donee certifies that vehicle is to be transferred to a needy individual for significantly below far market value in furtherance of donee’s charitable purpose
- Check box 5b if you intend to sell the vehicle to a needy individual at a price significantly below FMV or make a gratuitous transfer of the vehicle to a needy individual in direct furtherance of your organization’s charitable purpose of relieving the poor and distressed or underprivileged who are in need of a means of transportation. Do not enter any amount in box 4c. The donor’s contribution deduction for a sale for this purpose is not limited to the gross proceeds from the sale. Skip this box if the qualified vehicle has a claimed value of $500 or less.
- Box 5c – Donee certifies the following detailed description of material improvements or significant intervening use and duration of use
- Describe in detail the intended material improvements to be made by the organization or the intended significant intervening use and duration of the use by the organization. Skip this box if the qualified vehicle has a claimed value of $500 or less.
- Box 6a – Did you provide goods or services in exchange for the vehicle?
- You must check the box to indicate whether you provided goods or services to the donor in exchange for the vehicle described in boxes 2a, 2b, 2c, 2d, and 3.
- Box 6b – Value of goods and services provided in exchange for the vehicle
- If you checked “Yes” in box 6a, complete box 6b. You must give a good faith estimate of the value of those goods and services including intangible religious benefits. Include the value of any goods and services you may provide in a year other than the year that the qualified vehicle was donated.
- Box 6c – Donee certifies that the goods and services consisted solely of intangible religious benefits
- If you checked “Yes” in box 6a, describe in detail the goods and services, including intangible religious benefits, that were provided to the donor. If the donor received only intangible religious benefits, check the box.
An intangible religious benefit is one that is provided by an organization organized exclusively for religious purposes and which generally is not sold in a commercial transaction outside the donative context.
- Box 7 – Donor may not claim a deduction of more than $500 for this vehicle
- If the vehicle has a claimed value of $500 or less or the donor did not provide a TIN, you must check box 7. If you check box 7, do not file Copy A with the IRS and do not furnish Copy B to the donor.
Remember, not all boxes will be filled out on every 1098-C form. Only the relevant boxes for the specific payments made will have amounts or indicators.
Can you correct a 1098-C?
Yes, you can correct a 1098-C. Please see the corrections and negations section for details.