Charity donation receipts are important for multiple reasons – tax exemption, financial records, IRS requirements, etc. Some of the allure of donating to a 501c3 lies in receiving a deduction on taxes because of the value of their donation.
Theoretically, you could provide a receipt for every donation made to your organization, but this is a tedious task. With so many receipts to handle, it could also cause clutter for the organization as well as the donor. Thus, the best practice is to provide a single receipt once a year. Even if you have been providing individual receipts for each donation, it is also best to send one at the end of the year.
This way, your donor will have proof of all the donations they made during the previous tax year to your nonprofit, organized in one place to make accounting easier. Generally, they do this at the start of the year, when they are getting ready to file tax returns.
Although the IRS does not have any specifications in terms of nonprofit donation receipt requirements, treasury regulations are quite particular about what information may or may not go into a receipt. The situation can be different for each organization. However, in general, there are some elements that every receipt should share.
- The legal name of your organization
- The Federal Tax Identification Number for your organization
- The amount that has been donated to your organization
- The date on which the donation was made
- The date on which the organization received the tax-exempted status
- A statement for whether or not the donor received anything with a market value in return for the donation they made
- A statement with a description and estimate of the value of goods and services, if any, that the organization received in return for the contribution
Each receipt should ideally also include the charity’s address, though this is not mandatory. This is to ensure that the donor has records of the charity’s address in case of any issues.
Nonprofits need to be extra careful towards the end of the year in December when donors mail checks that the organization doesn’t receive until January next year. Since the date of the donation is extremely important, with there being cases where incorrect or missing dates caused the contribution to be disallowed entirely, you want to make sure there are no discrepancies in the date you report to the IRS.
To make sure you are meeting all the requirements, you can use a pre-existing template, easily found on the internet. Alternatively, you can opt for software/online programs that can not only handle your donations but also generate receipts immediately that don’t require you to do anything.
Regardless of how you go about it, donation receipts are an essential part of your nonprofit’s operations that you should make sure not to miss.