Mastering the Donation Receipt: Steal These Invaluable Tips, Must-Have Elements, & Templates

To those outside the nonprofit realm, a donation receipt is often a convenience — something to be used for a small tax break come the end of the year. To nonprofit organizations, donation receipts are an essential part of bookkeeping and maintaining their nonprofit status.

But, despite their necessity, there’s no single standard format for donation receipts. And even worse: failure to provide proper documentation of donations can result in a $10 fine per donation, with a maximum of $5,000 per fundraiser or event.

This guide will help you avoid this penalty and keep your donation receipts clean and functional. The donor wins, and you win.

What Constitutes a Tax Donation Receipt & When Are They Required?

All donation receipts are the product of a donor giving a donation, but not all donations produce a donation receipt. While there are a few instances where you always provide a receipt, more often than not, you simply need to know the rules. Because of this, it’s important to know what constitutes a tax donation receipt, and what doesn’t.

Plus, there are IRS requirements for both donors and nonprofits to consider when it comes to tax donation receipts.

Requirements for Donors

To put it simply: donors need donation receipts if they want to claim charitable donations on their tax refunds. Furthermore, if a donation exceeds $250, the donor must obtain written acknowledgement of the donation from a charity before claiming a charitable contribution on their federal income tax return.

There are additional rules for donors if a vehicle donation is involved. These can be found in the IRS handbook.

Recordkeeping Requirements for Nonprofits

It might seem obvious, but in any case where a donor is required to receive a receipt, a nonprofit must provide said receipt which requires additional bookkeeping on their end.

Like a business, a nonprofit must be able to account for all of their income — in this case, donations. Besides receipts, a nonprofit must maintain standard records such as:

• Separate recordings of each donation, no matter the amount. This includes non-monetary donations, such as land or other types of property. This must then be appraised and recorded.
• A general ledger must be kept, documenting the initial donation and its value before deposit.
• A journal must also be maintained, which will show all deposits and their credit value.

Exceptions to Providing Donation Receipts

There aren’t many exceptions to the IRS rules for providing a receipt, however, there are two that appear more frequently than others:

• Memberships: If a donor has an annual membership with your nonprofit they don’t need a receipt if the annual cost is $75 or less in goods or services provided in exchange. For example: If your annual membership costs a donor $75 and gives them free access to events and a $10 coffee mug, the donor only needs to report the $10 mug. Plus, no receipt needs to be generated.
• Token Exception: A token exception occurs when insubstantial goods or services are offered in exchange for a donation, with a combined value of less than two-percent of the donation or $106, or the payment is less than $53 and the items received by the donor bear only the name of the nonprofit and are valued at less than $10.60. This formula may seem confusing, but if this applies, then you don’t have to provide a receipt.

Have Donation Tax Receipt Questions?

Aside from the specifics stated above, there are some areas where nonprofits and donors alike commonly find themselves at a loss. And, as a nonprofit, knowing when your donors need a receipt will not only ensure you keep them within the rules of the IRS — it can lead to a show of good faith on your end and lead to increased loyalty.

Here are some of the more common questions you’re likely to encounter:

• When does a donated item need to be appraised?
  If a donated item exceeds the value of $5,000, it will need to be appraised by a qualified appraiser in order for them to claim it on their taxes.
• What happens with donations taken directly from the donor’s paycheck?
  In the case of a donor having an amount taken directly from their paycheck, they can use a W-2, wage and tax statement, or other employer-provided document that details the amount taken from their check. They can also obtain a pledge card from the organization that states they provided no goods or services in exchange for the donor’s money.
• How are unreimbursed expenses handled?
  Any unreimbursed expenses — such as transporting goods for the organization — that are valued at greater than $250 can be used for tax deduction purposes. However, the donor must keep a record of these expenses.

7 Must-Have Elements of a Donation Receipt: How to Create One

While there’s no single donation receipt template, there are several pieces of information the IRS requires a donor have when they claim a donation on their taxes. If a donor fails to provide the proper information, they will be unable to claim their donation on their taxes. This can’t result in a fee to the charity, but it can result in a loss of loyalty and give your nonprofit organization a bad reputation.

To prevent sending your donors away with improper or incomplete information, you must make sure your donation receipts capture the following IRS-required information:

1. Nonprofit and Donor’s Names and Address

Every receipt should include the name of your nonprofit, as well as the name of the donor. Also, include your organization’s address, as the donor will need to provide this to the IRS.

2. Contribution Date

Unbeknownst to many donors, the IRS requires the date a contribution was made to be documented in order to claim it. To help alleviate any future headaches for your donors, include a contribution date and help them stay on top of their filing for the next year.

3. Description of Donated Property

In the case of a cash donation you can simply put down the amount donated. But, in the event of donated property, write down a detailed description of the donated items. Group similar items for the sake of bookkeeping, such as multiple donated pieces of furniture, books, etc.

If a plot of land is donated, make sure you put down the address of the property so the IRS can cross-reference it with the address of the appraisal. If stocks are donated, capture the name of the company donating the stocks and the number of shares.

4. Statement Detailing If Goods or Services Were Exchanged for Donation

This is one of the most commonly missed items when donors attempt to claim charitable donations on their taxes. To make sure your donors get their tax benefits, include a line that states whether or not any goods or services were exchanged for the donation.

This line can be as straightforward as, “No goods were exchanged for this donation.” In the case of a religious benefit provided by the charity, you can say something such as, “Organization provided only intangible religious benefits to donor.”

5. Exact or Estimated Amount Received

If cash is the only thing being donated, state the exact amount donated on the receipt. If the donor gave something other than cash, such as a piece of property or books, it is the responsibility of the donor to have a proper appraisal performed for their records. You can, however, acknowledge the item on the receipt, and even have an estimated value line. Just make sure it’s clear this is an estimation, and not precise.

6. Value of Goods or Services Provided by Nonprofit

Now, if your nonprofit does offer some goods or services in exchange for their donation (above the $75 IRS threshold), then you need to disclose that. Also known as “quid pro quo,” you should state the value of any goods or services your nonprofit provided to the donor in exchange for their donation. While technically you’re only required to disclose the value to the donor when they donate more than $75, it’s a best practice to do so regardless.

7. Convenient for the Donor?

Simply put, charities should go above and beyond to make the entire process convenient for the donor. If your receipt is thorough and covers all of the bases the donor will need for tax reasons, they’ll likely donate to your organization over other nonprofits. Try to answer questions your donor might have before they even ask them, and have their receipt and answers ready as fast as possible.

6 Exemplary Donation Receipt Templates: Different Types

All donation receipts are not created equally. As previously mentioned, there is no universal template for donation receipts, either. However, there are some exemplary templates out there being used by nonprofits big and small. If you’re unsure where to start with your own receipt design, start here:

Template 1: Life Insurance Donation Receipt

This life insurance donation form for the Jewish Community Foundation covers the major bases required for life insurance donation, a process more complicated than a standard cash donation. Unlike other donation receipt templates, this type of form looks much more like a legal agreement as is needed to perform as a donation form.

Template 2: Cash Donation Receipt

The MARC association’s donation receipt is a great example of how to handle cash donations. It features an amount line, details of who received the donation, the donor’s address, and a spot for their credit card number. This checks the IRS boxes for claiming this as a refund, which ensures a smoother experience for the donor come tax time.

Template 3: Real Estate Donation Receipt Form

Much like the life insurance donation form or receipt, the real estate donation form is in-depth and less a receipt and more of a form or agreement. This example contains the pertinent information needed when accepting land given by a donor, and is essential for the record keeping of both parties.

Template 4: Household Items Donation Receipt

The Goodwill San Francisco donation receipt goes above and beyond, including a list of commonly donated items and their estimated value. There’s also a detailed list of contact info in the upper-right-hand corner, giving the donors an easy way to get back in touch with the nonprofit.

While every nonprofit isn’t as large Goodwill, this receipt is a great template to use and tweak, no matter the nonprofit size. Replace any of the items on the list to fit your own needs and add in a credit card or cash field if you often receive those types of donations alongside noncash ones.

Template 5: Car Donation Receipt

While it is more of a niche donation, vehicle donation receipts are a must if you plan on accepting vehicles, especially since there are unique rules that govern vehicle donations. The above receipt has all of the necessary forms, for both the nonprofit and the donor, and presents them in a simple but clean way. It also informs the donor that they can deduct up to $500 on their taxes without further documentation.

Template 6: Stock Donation Receipt

Stock donation receipts can be, like a general donation receipt, simple and straightforward. This one goes above and beyond by attaching itself to a “Thank you” letter, making it both a record for the donor and way to show how thankful you are. This two-fold approach can help boost donor loyalty, as they will have the records needed for their tax refund and appreciate your gratitude.

The Next Step: How Acendia Can Help

Donation receipts are both an art and a science. As a nonprofit, you don’t have the luxury of ignoring them — you must master them. But, a great donation receipt and donation-acceptance process can do more than ensure your donor gets their tax break; it can act as a form of marketing and positive press for your nonprofit.

Being a nonprofit, you probably have a lot on your plate, like donation receipts. Have you ever thought about how a custom, branded app could help your nonprofit stay on the cutting edge? Acendia can make this a reality, with a custom app that lets your donors stay in touch with you, donate from anywhere, and spread the good wordabout your nonprofit’s mission.

See how Acendia can help your nonprofit reach new productive highs, while being more efficient than ever. Contact Acendia today!

Originally published at learn.acendia.com on December 27, 2017.