Donation Receipt: What Nonprofits Should Know

When individuals or businesses contribute to a nonprofit, the organization is often required to provide a donation receipt. Also, a donation receipt not only acknowledges the donor’s generosity but also serves as an essential document for tax purposes.

• Nonprofits should formally acknowledge donations made by donors by giving them a receipt.
• The receipts for all nonprofit donations should be properly recorded.

What is a Donation Receipt?

A donation receipt is a formal acknowledgment provided by a nonprofit organization to a donor. It serves as evidence of the contribution made and establishes the organization’s compliance with IRS requirements. The receipt typically includes essential information such as the nonprofit’s name, tax identification number, donor’s name, donation date, and description of the donation. It also contains a statement acknowledging whether any goods or services were received in exchange for the contribution.

Why are Donation Receipts Important?

Firstly, donation receipts serve several purposes, benefiting both the nonprofit organization and the donor. For nonprofits, issuing proper donation receipts helps maintain transparency, builds trust with donors, and ensures compliance with tax regulations. Also, donors rely on these receipts to support their tax deductions. They serve as evidence of their charitable contributions when filing their tax returns.

Receipting Guidelines and Requirements

Nonprofits should familiarize themselves with the guidelines and requirements set forth by the Internal Revenue Service (IRS) when issuing donation receipts. The IRS has specific rules regarding what information must be included on the receipt, especially for contributions above certain thresholds. Nonprofits should consult IRS publications, such as Publication 1771: Charitable Contributions – Substantiation and Disclosure Requirements, to ensure compliance.

Timing and Delivery of Receipts

Donation receipts should be provided to donors promptly. Generally, nonprofits should issue receipts immediately after receiving the donation. The receipt can be sent electronically via email or delivered in physical form. This depends on the donor’s preference and the organization’s procedures. Electronic receipts should be properly formatted and include all required information. Physical receipts should be printed on the organization’s letterhead.

In-Kind Donations and Valuation

In addition to cash contributions, nonprofits may also receive in-kind donations, such as goods or services. When issuing a donation receipt for in-kind donations, nonprofits should describe the donated item or service, along with an estimated fair market value. It is essential to clarify that it is the donor’s responsibility to determine the value of the donated items. The nonprofit should not provide a specific dollar amount.

Retention and Record-Keeping

Nonprofits should maintain accurate records of all donation receipts issued. For recommendation sake, retain copies of the receipts, both electronic and physical, for a minimum of seven years. These records serve as evidence of the organization’s compliance with tax regulations. It can be crucial in the event of an audit.

Conclusion

Issuing proper donation receipts is essential for nonprofit organizations to acknowledge the generosity of their donors, maintain transparency, and ensure compliance with tax regulations. Hence, nonprofits should be familiar with the guidelines and requirements set by the IRS regarding the content, timing, and delivery of donation receipts.

By implementing effective receipting practices, nonprofits demonstrate their commitment to accountability, strengthen donor relationships, and support donors in their tax filings.