A Charity's Responsibility in a Silent Auction
Silent auctions are popular fundraisers for schools, churches and charities. Whether held as an evening event or online through a silent auction website, the charity sponsoring the auction has certain responsibilities to donors, bidders and the Internal Revenue Service. Silent auction planners should make sure they understand these responsibilities before the event begins.
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Solicit Goods and Services
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The first responsibility of a charity running a silent auction is to solicit goods and services to be auctioned. If the charity is eligible to receive tax-deductible contributions, the charity should provide a receipt to each donor stating what good or service was donated. This receipt may be a letter or form on the charity's letterhead that confirms the charity is a tax-exempt organization. The receipt or form should also confirm the value of the gift as stated by the donor. The donor is responsible for verifying that value if and when they claim it as a tax deduction.
Value Goods and Services
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The charity must determine the fair market value of each good or service before the auction takes place. This may or may not be the same as the value stated by the donor. It is the charity's responsibility to determine what the actual price of similar goods are and to make that amount known to bidders in advance of or at the time of the auction. The charity can determine fair market value by looking at local retailers, checking catalogs or searching online retailers.
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Run a Fair Auction
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The charity should establish ground rules for its silent auction before it begins. Typically, each item is placed on a table with a bid sheet next to it, and bidders can walk around the room placing their bids on paper. The charity should determine in advance what time the auction begins and ends as well as if bidders must be present to bid or if they can phone in bids. Once the auction begins, the charity should stick to its established procedures and award each prize to the highest bidder at the time the auction ends.
Provide Receipts
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Any bidder who pays more than the fair market value, as established prior to the auction, for a good or service is entitled to a receipt for their contribution. The contribution is determined as the amount paid minus the fair market value of the item. The charity should provide receipts showing this contribution to all bidders who pay over the fair market value of the item.
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