Monday, January 13, 2014

Tax Deductions for Giving - Keeping Donors Happy

It’s early January and here at our accounting firm and we are moving at warp speed.  The IRS has some required deadlines that force us to work seven days a week to help our clients comply.  We are busy preparing our W-2s for all of our payroll clients, and 1099’s for our business clients.  These documents have to be in the mail by January 31st.

Does your small nonprofit have any worries for January?

Previously we discussed your need to prepare 1099s for those unincorporated businesses that provided services to your organization, and they must be mailed by January 31st.  There is another potential requirement for you!



If you are a 501(c)(3) organization, you probably rely on charitable donations to fulfill your mission. If you haven’t been providing receipts to your donors, you may start getting requests.

The internal revenue code places the burden of obtaining receipts with the donor, not the charity. Charitable organizations do not incur a penalty for neglecting to deliver a receipt. Yet, without your receipt the donor can be denied a tax deduction.  Keeping your donors happy by providing what they need to get their tax deduction can help encourage consistent participation by donors.

A Treasurer’s Briefcase best practice is to deliver the receipt when you receive the donation or shortly thereafter.  Maintain copies as you may get requests in January from donors who have lost their receipts.

IRS rules do not allow donors to take a charitable deduction for a donation of $250 or more unless contemporaneous written acknowledgement is obtained from the charity. Contemporaneous basically means the donor must have the receipt or thank-you letter by the time their tax return is filed.  In addition, the acknowledgement must say whether the donors received anything in return for the donation.

You should become familiar with the substantiation requirements to ensure the donors that are so crucial to your mission sustain their charitable contribution deductions.

IRS Requirement

According to the IRS, here are some of the key items a proper receipt must include:

  • Name of the organization
  • Amount of cash contribution
  • Description (but not the value) of noncash contribution
  • Statement that no goods or services were provided by the organization in return for the contribution, if that was the case
  • Description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution
You can find more information in IRS Publications 526 and 1771.  Below are some example templates you can you use for providing receipts to your donors.

Sample Receipts

Cash Donation
Property Donation


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