The New Year has begun, and for most non-profits, the busiest and biggest donation month has ended. All of the Thanksgiving, Christmas, and Year End appeals have been polished off. Time to sit back and relax right?
Well, not quite. For me, January is always the busiest month of the year because this is when end of year non profit donation tax receipts are sent out to donors. So I spend January pouring over our donor database correcting addresses, making sure donations are all recorded correctly, and getting everything set up with the printer and mailing house.
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Do I have to send out end of year donation reports? In order to answer that we need to take a look at IRS Publication 526. Here’s what your donor will be needing in order to claim a deduction on their taxes.
- For individual donations under $250, they can use their bank statement or a letter from your organization.
- For individual donations over $250, they need a proper letter from your organization.
So, technically, for donations under $250, the donor doesn’t need your letter. And if you’ve sent out a donation acknowledgment letter right after each donation they don’t need an end of your letter. But, honestly, it’s a great way to steward your donors. Let them now how much they gave throughout the year, and better connect them with the impact. Plus, they’ll just be really happy to have an easy and convenient report of their giving and not have to search through a years worth of records.
There are two key aspects to every good donation summary letter. It must meet the IRS requirements for a donation receipt. And it must help maintain your connection with the donor.
Here’s a quick summary of the requirements listed in the IRS Publication 526 – regarding charitable contributions.
- It must be written – or printed, email counts. No verbal receipts
- It must include the amount contributed
- It must state whether the donor received any goods or services for the donation
- It must include the name of your organization
- It must include the date of contribution
Other than these five things the letter can contain anything you want. I suggest a warm thank you and a nice note saying how happy you are to continue working with them through the next year.
Donation Receipt FAQ
Should a donation be recorded on the date received or the date on the check?
According to IRS Publication 526, p13, a donation should be recorded “at the time of it’s unconditional delivery.” In other words if it’s hand delivered then at the time of delivery. If it’s mailed by check then on the date of mailing, which would be the postmark date.
What should a donation receipt look like?
Anything you want. As long as you include the 5 items listed above. Make it fit the image of your organization. If you want to get fancy you can turn it into a 4 page impact report. If you want to save money it can be just one page. I suggest something similar to your letter head. Check out this sample End of Year Tax Summary for some ideas.
How do I value in-kind donations?
Don’t! You are in the business of helping people not estimating product worth. It is the donors responsibility to estimate the value of the items for tax purposes. All you have to do is list a description of the item. Leave the heavy work up to the donor.
If I included donation info on thank you letters for each donation do I still need to send a year end summary?
No. If your thank you letter contained all five of the points above you do not need to send a year end summary. But, you still might want to send one anyway for the convenience of your donors.
updated 2017
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Can an end of year donation receipt be sent via email?
Rita,
Yes, end of year donation receipts can be sent by email. While I send most tax receipts out by paper mail I also have many donors who request it just be emailed to them.
I think it makes sense to send out e-mail receipts to people who donate online, because you’re probably much more likely to have there email address. While if you are receiving most donations via check or cash in the mail then you probably don’t have e-mail addresses associated with your donor profiles.
So how does a nonprofit organization work at the end of the yr. Do you receive tax money back?
Are you required to sign a tax receipt for an individual if you do not have records of the transactions they are claiming? And are you required to sign a tax receipt for donations/in kinds that do not pass through your accounts?
Dekyong, you should only sign tax receipts for donations that you actually received. If I didn’t receive it, then I wouldn’t sign it. But, you better be right that you didn’t receive it because it’s going to make the donor really really mad if they really did give that donation.
Is there a deadline? Am I too late to send these out on February 1?
MQ, as far as I know there is no deadline because the IRS does not force a non-profit to mail out a tax receipt. (IRS Publication 1771 says, “An organization that does not acknowledge a contribution
incurs no penalty; but, without a written acknowledgment, the donor cannot claim the tax
deduction.”) Your donors will want the tax receipt to file their taxes. In my experience if you don’t send receipts out by the 3 week of January, you will start getting phone calls from donors looking for their receipts. So, it’s up to you to judge whether sending them out now would be too late to be helpful for your donors.
Is there any software or program that makes it easy to automatically print out all the letters if you have a spreadsheet with the donor info? As oppose to typing the name and donor info into a thousand different letters and printing each one out? Would appreciate any info regarding this. Thanks!
Rob, check out this page http://www.nonprofit-success.com/administrative/word-mail-merge-driving-you-crazy/ It explains how to do a mail merge using Microsoft Word and Microsoft Excel, which sounds like exactly what you need.
Thanks for the info one more question, I’m from Michigan and I’ve been told by people that it is law that nonprofits have to send out end of the year tax receipts, can you point me to any info where I can prove that you don’t? Thanks!
Rob,
Here is the IRS publication that references acknowledgement of charitable contributions. http://www.irs.gov/publications/p557/ch02.html#en_US_2011_publink1000199971 Here is also a quick overview pamphlet http://www.irs.gov/pub/irs-pdf/p1771.pdf
It’s pretty clear that there is no penalty for an organization that doesn’t send out a tax receipt. However, I’d like to emphasize that it can be extremely beneficial to your relationship with your donors to send year end statements. It not only is helpful to the donor for tax purposes but it triggers an emotional response that connects their donations with your organization and it’s mission.
The above applies only to the IRS and is true only on a federal level. I don’t know if there are any special laws in the state of Michigan. This is also only in regards to direct donations, and does not include “Quid pro quo” donations, or donations in which the donor received something in return (i.e. concert tickets).
This is the best article on the web for creating end of year tax receipts. Thank you so much for creating this to help out us newbies.
Thanks Joshua. I’m glad you found it helpful.
Is it a requirement that we include a donor’s contact information on a receipt? If we only have the first and last name, is that enough information, along with the gift date and amount? Thank you!
Laura,
I believe you only need the name. See http://www.irs.gov/publications/p557/ch02.html#en_US_2011_publink1000199971 under Cash Contributions.
Justin, what about contributions where FMV is fuzzy – for example, if someone were to purchase outright a piece of art created by a student served by a nonprofit? Could FMV be determined by the value of frames or other material costs that went into the art? Thanks!
Jeff, it’s up to the donor to determine fair market value. Your job is simply to provide acknowledgement that the item was received. Now, if the donor is asking for help, you of course want to do whatever you can to help, and that’s where I would connect the donor with a professional appraiser.
This web page is a great resource! Thank you for all the info. I do have one question: If your nonprofit organization received a bequest (a member of a church passed away and left some money to the church) , would you send an end-of-year tax receipt letter to the executor of the estate?
My question: Is it required to type the end of the year donation tax receipt
on a certain size of paper? I appreciate any information I can get on this.
Nope, any size, as long as it meets the five requirements above.
So, the date of contribution cannot be generic? Such as, in our letter listing their total amount of giving in 2014 as opposed to itemizing one or more contributions by date?
If someone gives a stock donation (for example, 50 shares of XXXX), what is the correct process for acknowledgement and receipt? Does the donor receive a letter stating the value of shares at the time of sale and the total amount?
I would focus on acknowledging what you received. For example, if they transferred the stocks to you, then acknowledge the number of shares of stock, if they sold some stock and had the cash transferred to you then acknowledge the cash value received.
Great Forum!! I’m wondering if we need to notify donors at the end of the year if we have thanked them for each donation as the year went along. And can it be via email. Our current policy is to do a year end thanks to all donors who contributed more than once during the year.
Marjorie,
You don’t have to send anything at the end of the year, but I highly recommend it, even if they were thanked throughout the year. As for email vs print, I would suggest using whatever your donor is most comfortable with.
Ok – am responsible for tax receipt letters for a 501(c)(3) (I am volunteering) – trying to get it all straight
1.Cash donation – include amount and whether any goods or services provided – got it. Estimate FV of goods rec’d – understand about putting value on meal at gala, for example, but what if they bought a silent auction item? Is that reported on tax receipt? What info is required – [how much they paid, description, FV (how would you determine that?) ]?
2. Donation of items for auction – is that reported on tax receipt? Is it just the description? We wouldn’t use the FV they provided us with when they filled out a donation form, would they?
I have a donor who does not think that we need to include his IRA rollover gift on his annual statement. My answer is that it should be because it was a gift made by the donor through the donor’s IRA. Plus that’s the only way they can record the taxable gift.
Our software (RE) has no way to distinguish an IRA rollover from a regular cash gift. As these become more common, this could create a logistical headache if I had to keep these separated. Hopefully, he’s just getting bad advice from his tax advisor.
If someone donates via a donor advised mutual fund (e.g. Fidelity Charitable Fund), they received a tax statement from Fidelity. Should we send them one as well?
No, you should not send them a donation receipt, however, you should send them a thank you letter.
Who should sign the End of Year receipt letter? The Executive Director of the organization or the Director of Donor Relations?
I just received a couple of checks dated 2019 (I think they were not given to me in a timely manner, but I believe the donor passed them on ‘last year’). If they are not deposited until 2020, is there anything that says I can’t include them in last year’s giving record?
I am the treasurer of a 501C3. The majority of our donations are coming from FaceBook fundraising …such as the Facebook Birthday Fundraiser. What is the legal way to acknowledge this donation? Facebook does not include a complete email address for every single donor…the majority only list their facebook name.
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