One of the best ways to protect you and your nonprofit is to handle all donations correctly. An essential part of receiving donations is to create donation receipts! Read Chisholm Law Firm’s blog to learn more.
What are donation receipts?
A donation receipt is proof that someone donated to your nonprofit, whether it was monetary or an in-kind gift. It is a written acknowledgment of a donor’s generosity, and it is an essential piece of financial paperwork.
Why are donation receipts important?
Donation receipts are essential for several reasons, for both donors and your nonprofits. Let’s look at some of the benefits they provide.
Benefits for Donors
While not everyone donates for the same reason, some people contribute to nonprofits to receive tax deductions. However, the IRS requires that donors provide documentation of their charitable gifts. Sending out donation receipts lets donors receive tax deductions.
They also let donors know that their donation was received, which is vital for all contributions, especially online gifts. People who give to your nonprofit want to know that you’re receiving the support you need!
Receipts are also helpful for donors to keep track of their finances. Many people like to keep an eye on where their money is going. Providing donation receipts is an excellent way to make life easier for your donors.
Benefits for Nonprofits
Keeping track of donation receipts helps you comply with all legal requirements. In some cases, the IRS requires you to send out receipts for charitable gifts. If you fail to send a receipt, you may be fined $10 for each contribution and $5,000 for each campaign.
Sending out donation receipts is also helpful in tracking your organization’s donation history. When you keep a log of everyone who has given to your nonprofit, you create a list of people you can contact when it’s time to fundraise.
Donation receipts help you keep accurate records of where your money is coming from. Clear financial records will help you budget for your nonprofit and give you a better look at your financial statements.
When are donation receipts required?
While you technically only have to issue donation receipts when single donations are more than $250, it’s generally a good rule of thumb to always issue receipts, no matter the size of the contribution.
Since donors can’t claim a tax deduction without documentation, it’s beneficial to provide a donation receipt. If the donation is less than $250, you can send a written thank-you note or an email. However, gifts over $250 must receive an official receipt.
Regardless of the amount given, it’s still important to send out a donation receipt. Receipts can deepen your relationship with donors and offer donors the opportunity to claim deductions if they so choose.
How do you create donation receipts?
There are a few different ways to create donation receipts, depending on how someone donated. If they contributed through PayPal or another merchant processor, the platform would likely send them a receipt.
If you aren’t using an online payment platform, you can create templates for letters and emails. Using templates can be as simple as writing down the information in an online document or as complex as using donation software.
What should donation receipts include?
The IRS is very clear in the information that a donation receipt should include. To comply with legal requirements, receipts should consist of:
- Donor’s name
- Name, address, and phone number of your nonprofit
- Date of the contribution
- Amount donated
- Indication of whether the gift was financial or non-monetary
- Description of non-monetary donations
- Whether or not your nonprofit provided goods or services in return for the gift
- Name and signature of the authorized representative
Donation receipts can take various forms, including a thank you note, email receipt, or postcard. No matter how you send out your receipts, the receipt must include all of the above information.
Speak with an Expert
If you need help creating and implementing donation receipts for your nonprofit, you should consider speaking with a nonprofit attorney who can help you understand the best practices. Here at Chisholm Law Firm, we will help you do everything the right way.
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 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.
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