Financial Paperwork is Vital for Your Nonprofit
You must do a few things regarding accepting donations to protect yourself from financial liability. You’ll need to craft financial paperwork, like donor contribution statements, donor receipts, and donor agreements.
Donor Contribution Statements
Technically, the IRS requires a contribution statement for donations over $250 or if you provide goods or services for gifts over $75. However, I recommend that you issue statements for all donations. Let’s go over why.
First, providing a statement documents that the amount received was a donation. It also clarifies that there is no expectation of goods and services in exchange for the amount. Although this should be clear when someone gives, it never hurts to put it in writing.
Second, a written contribution statement conveys your appreciation for the donation. In our contribution statements, we always have language that shares the nonprofit’s heartfelt appreciation for the gift.
Last, a written contribution statement is an opportunity for you to highlight accomplishments of your nonprofit. It also allows you to describe the impact your nonprofit is making as a result of their contribution. This written statement serves a two-fold purpose: showing that you are executing your mission and using the money respectfully.
It allows the donor to know that they are supporting an organization that is executing its mission successfully, as reflected in the accomplishments you share in the contribution statement.
When you send out statements, your donor sees that you are using the money for the nonprofit’s good. They can see that you are spending the money well, which will hopefully encourage them to donate again in the future.
We recommend that you give donors a receipt after they donate. Even if they donate through a website that autogenerates a receipt, it is vital to have it on file for accounting purposes. This type of financial paperwork will help your nonprofit’s recordkeeping.
When you keep your donation receipts on file, you’ll have accurate records as it relates to the funds received by your nonprofit, as well as the sources of those funds. Having them will be helpful when preparing paperwork for the board of directors and retargeting previous donors.
If a donor approaches you with the intent to make a significant gift to your nonprofit, I would recommend that you have a nonprofit attorney prepare a donor agreement. A donor agreement is a legal document outlining a charitable gift’s terms.
This agreement will lay out the rules for the donation and make sure that both parties comply with the IRS. A donor agreement is critical if the gift comes with restrictions or stipulations.
My firm drafts donor agreements all of the time. Agreements help parties avoid misunderstandings, in addition to preventing the donor from requesting their money back or claiming that they’re owed benefits or services in exchange for the gift.
Speak with an Experienced Nonprofit Attorney
There are several benefits to creating financial paperwork for your nonprofit. When you make your donor contribution statements, donor receipts, and donor agreements, you encourage further donations and protect yourself from any financial liability.
If you need help setting up your nonprofit’s financial paperwork, you need the right team with the expertise to help you on this journey. Chisholm Law Firm has helped thousands of people start and grow nonprofits that impact the world. If you want the best for your nonprofit, look no further than Chisholm Law Firm. Our clients have a 100% success rate for nonprofit filings and trademark filings*.
You can rest assured that your nonprofit is in the best hands and that we’ll get everything done right the first time. Call us today to schedule your free consultation.
It shouldn’t be this hard to be a superhero.
*Past results do not determine future outcomes.