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Home Library FundRaiser University What needs to be in your Tax End-of-Year letters?
What needs to be in your Tax End-of-Year letters?

by Sasha Daucus

Many organizations use this time of year as an opportunity to send out a mailing that helps donors in reporting their charitable donations. In many cases, there will be no actual legal need for you to report these donations to your donors, but the opportunity to be of service is still a valuable one.

For tax purposes, the United States Internal Revenue Service (IRS) has two general rules on There may be no actual legal need for you to report these donations to your donors, but the opportunity to be of service is still a valuable one. reporting:

– a donor is responsible for obtaining a written acknowledgment from a charity for any single contribution of $250 or more before the donor can claim a charitable contribution on his/her federal income tax return.

– a charitable organization is required to provide a written disclosure to a donor who receives goods or services in exchange for a single payment in excess of $75.

Include in your statement the following information:

  1. name of your organization
  2. amount of money donor contributed
  3. description (but not the value) of non-monetary contribution
  4. statement that no goods or services were provided by the organization in return for the contribution, if that was the case
  5. description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution
  6. statement that goods or services, if any, that an organization provided in return for the contribution consisted entirely of intangible religious benefits, that was the case. (see IRS publication 1771 listed in resources below for clarification information).

It is not necessary to include either the donor’s social security number or tax identification number on the acknowledgment.

A separate acknowledgment may be provided for each single contribution or an annual summary may be used for several contributions.

There are no IRS forms for the acknowledgment. Letters, postcards, or computer-generated forms are all acceptable; they can be sent either by regular mail or by email addressed to the donor.

To be of the greatest service, send these letters no later than January 31 of the year following the donation. For the written acknowledgment to be considered valid by the IRS, a donor must receive the acknowledgment by the the date on which the donor actually files his or her tax return for the year of the contribution.

Here are some examples:

– "Thank you for your cash contribution of $300 that (organization’s name) received on December 12, 2005. No goods or services were provided in exchange for your contribution."

– "Thank you for your cash contribution of $350 that (organization’s name) received on May 6, 2005. In exchange for your contribution, we gave you a cookbook with an estimated fair market value of $60."

It is a service to give your donors proof at tax time to show what they donated and what is eligible for tax deduction. It speaks well for you, and helps enforce the image of a well-organized, responsive group in the donor's mind.

It also reminds them of who you are and that they donated to your organization. You have an opportunity to restate your case and remind them of why they donated... and might want to donate again!

With your letter going out in January, you have a chance to solicit funds when others are not asking. After the rush of fundraising during the holidays, quiet falls at the end of the year. Time your letter to arrive after the rush, and people will respond. You can more than pay for your mailing in this way.

Resources

IRS Publication 1771, Charitable Contributions—Substantiation and Disclosure Requirements, explains the federal tax law for organizations such as charities and churches that receive tax-deductible charitable contributions and for taxpayers who make contributions. Downloadable at www.irs.gov/pub/irs-pdf/p1771.pdf

Exempt Organization customer service–Telephone assistance specific to exempt organizations is available by calling IRS Exempt Organizations Customer Account Services toll-free at (877) 829-5500.

Exempt Organization Web site–Visit the Exempt Organizations Web site at www.irs.gov/eo

Sasha Daucus is Newsletter and Web Content Editor for FundRaiser Software. Through her work at FundRaiser, she volunteers as forum host and facilitator for TechSoup, a nonprofit technology help site. Outside of work, she volunteers for the National Alliance for the Mentally Ill. In her free time she enjoys nature photography and listening to world music from the Mediterranean region.

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