Donor Acknowledgment for Donations
Donations are essential to non-profit organizations and donor acknowledgment is vital for tax deductibility of charitable donations. All donors are required to obtain a written receipt issued from the organization when making a single contribution of $250 or more.
Without a proper receipt, a donor may not deduct the value of the contribution against their taxable income for the year. Many organizations make it their policy to send a receipt for any size donation.
The acknowledgment can take the form of a thank you letter, or something that looks more like an official receipt. Whatever method is used for the acknowledgment, the following information is required to be included:
- Legal name of the exempt organization donee;
- Name of the donor;
- Date of the contribution;
- Amount of the contribution, but only if cash was received;
- A statement regarding whether or not any goods or services were provided in exchange for the contribution;
- If applicable, the value of the goods or services provided by the exempt organization to the donor; and
- For non-cash donations, a detailed description of the property donated, but no amount of contribution is included.
While charitable organizations are not subject to IRS penalties for failing to issue donor receipts, there are potential donor relation consequences if a donor’s tax deduction is disallowed due to inadequate documentation of a charitable gift.
There is potential for IRS assessment of penalties on the charity if the charity fails to give donors a good faith estimate of the value of any goods and services provided in exchange for a donation in excess of $75. This will be further explored in a later newsletter.
This is the first of a three-part series on handling donations. In the next article, we will address the issue of determining the proper date of the contribution