What a Charity Needs to Know About Donor Relations
Many charities spend most of their fundraising efforts on recruiting donors, including sharing their missions and encouraging continued giving. One very important part of donor relations is the timely and proper acknowledgements given for contributions received.
Most churches and charities know the importance of giving timely receipts. Although a big effort, it’s essential those donors have proof of donation to support their tax deduction for the year. Today, we’ll remind you of the fundamentals and share a recent development that reinforced the importance of a proper receipt.
1. All charitable contributions need to be substantiated with a written receipt or a cancelled check. There is no “standard” or minimum amount allowed.
- Cash contributions aren’t deductible without an acknowledgement from the charity of that donation.
- Since cancelled checks are rarely returned to the donor, such documentation may be a challenge to produce as proof in the case of an IRS examination, especially a couple of years later.
- Any charitable contribution must have a written receipt if the amount is more than $250 for the year. The receipt must include the charity’s full name, donation date and amount.
- The receipt needs to be contemporaneous to the donation, which is to say the earlier of 1) the date a taxpayer files his/her return for the year including the gift; or 2) the due date of the return showing the deduction with extensions.
- If the gift is at least $250 for the year, the requirement for the receipt is absolute. Without that piece of paper, or an electronic equivalent, you have no basis for a tax deduction. The receipt can list each individual contribution for the year or it can provide just a summary with the annual total.
- In addition to the content mentioned above, if there was other than a di minimus item or service given in return for the payment, the value of that benefit should be stated on the receipt. Of course, only the net amount can be deducted. Typically, di minimus payments would be return items of more than 2% of the donation.
- If the contribution is to a church and nothing is provided except for typical religious benefits, the receipt must state something to the effect of: “No goods or services were provided to you by the church in connection with any contribution, or their value was insignificant or consisted entirely of intangible religious benefits.”
The Tax Court recently ruled that a taxpayer couldn’t take a deduction for $22,517 because the cancelled checks were not sufficient support for the donation. The church’s contemporaneous receipt didn’t have the required “intangible” statement noted above. A subsequent letter from the church with the statement wasn’t considered timely enough support. Consider the awkward relationship that church now has with those members for simply not providing a basic contribution receipt.
2. Non-cash contributions less than $250 only need a charitable receipt and other proof of the items donated.
- More than that amount, all of the above rules also apply.
- Non-cash gifts of at least $500 up to $5,000 need documentation of how the items were acquired, when they were obtained, and the original cost. Form 8283 must be included in the tax return.
- Individual items given more than $5,000 require an appraisal, as well as the signature of the appraiser and a representative of the charity on Form 8283.
Donor relations are essential to encouraging benefactors to support your mission or ministry. Keep them happy by doing your part in documenting their contributions properly and timely. If you have any questions or need more information, contact Online Stewardship Accounting & Consulting, at 904-398-4747 or Lynn@onlinestewardship.com.
