For nonprofit organizations, there are different fundraising campaigns that drive donations all year round. In the process of fundraising for nonprofits, receipts need to be given for every donation made.
What exactly is a Donation Receipt?
In simple terms, a donation receipt is a written acknowledgement that a donation has been made. Donation receipts are proof of an in-kind or a monetary contribution to an organization.
These can be in the form of a letter, email or even a card; the receipt has to state the name of the donor and the organization, the date and the amount that has been donated. Many nonprofits send out donation receipts by the end of the year or the first month of the following year. However, it is advisable to send out receipts as soon as possible due to the fact that donors are more likely to give again when their gifts are acknowledged within 48 hours of the donation.
Why are donation receipts important?
Donation receipts play an important role for both donors and nonprofit organizations. Fundraising for nonprofits includes documentation and receipts are an important part of the same. As for the organization, failure to send receipts can result in a penalty of $10 per donation. It also helps a nonprofit to track donor records and maintain an accurate financial record. The availability and deliverance of donation receipts are also a part of an excellent donor stewardship.
When it comes to donors, donor receipts are needed as documentation for tax deduction related to charitable giving. Donors are required to provide the IRS with a proof that donation has been made. The receipts also act as a confirmation of donation and help donors to keep a precise financial record.
When are donation receipts necessary?
It is a general rule that donors cannot make a claim for tax deduction without a proof of donation. For gifts that are below $250, receipts can be given in the form of a thank you note or an email. On the other hand, an official receipt has to be given for gifts that are above $250. It is most ideal to give all receipts in the form of an official one. An automated email with details of the donation as soon as the donor donates is a perfect example.
There are mainly two exceptions where nonprofits do not have to provide receipts. The first one is known as a “token exception” that applies when nonprofits, in exchange for a donation, provide donors with insubstantial goods or services. The second one is a “membership exception” that states that nonprofits do not necessarily have to provide a receipt for insubstantial goods and services that are given in return for contributions made by donors with annual memberships. In case a receipt has to be given at all for any of the two cases, the receipt must include a description of the goods and services and an estimate of the value of the same.
In case of direct deduction from paycheck, donors can use different documents as a donation receipt. For instance, Wage & Tax Statement, W-2 or other employer document delineating the withheld amount can be used as a receipt. A pledge card is a good option as well.
When it comes to unreimbursed expenses, a donation receipt must be secured for any donation amount. This is for any amount that is greater than $250 in the form of unreimbursed expenses that refers to the transportation costs paid for the donated services.
Donation receipts can be confusing at times, but receipts are an important aspect when it comes to fundraising for nonprofits. When you have multiple fundraising campaigns that are running successfully, management and record keeping have to be perfected as well. It is also extremely important to familiarize yourself with the rules laid out by the IRS. All the very best for your fundraising and receipt issuing!
Downloading your tax letter from your GiveCentral account
GiveCentral users can download their donation receipts/ tax letters from their profile by following these simple steps.