Giving proper donation receipts for your contributors. Fundraising ideas and proven fundraiser tips FREE for nonprofit groups -- ProfitQuests.com tips on acquiring new donors.

Donation Receipts

One of the most overlooked, frustrating and

least understood situation for many nonprofit

organizations is how to send out a proper

receipt that will be recognized by the IRS.

You will find several scenarios here that will help you prevent problems for your donors as they report their tax exempt charitable deductions. For reviewing all of the IRS Rules on this subject you may go to their Contributions section.

Dinner and Auction Example

Anytime that a donor gets something for their donation, a receipt must generally reflect the amount allowable for tax reporting purposes. Basically, it's the ticket (or donation) price minus the fair market value of the item gained.

A Dinner with an accompanying auction or silent auction that asks for a $50 donation and you meal costs $10 will start off with only a $40 allowable donation.

If the donor also buys an item for $10 in your auction and the fair market value is $15, then the allowable deduction is now $ 25. Or, if a donor buys an item for $50, then the donor gets no allowable tax deductions.

You might have on your ticket reciept something like "Ticket prices for the ABC Event are $XX.00, of which $XX.00 is tax deductible. You will receive a formal receipt mnus any gained auctioned items after we have processed your donation.

Quid Pro Quo

Basically, quid pro quo (QPQ) means that

someone gets something in exchange equal

or greater in value than what they give as a

donation.

As of this date, the IRS requires a QPQ with

a price exceeding $75 must be reported even if the receipt is for less. Under $75, you are not required to report it.

Giving Or Not Giving A Receipt

Basically, it is up to your organization on how to give receipts. If you are on the web and using a nonprofit gift processing company like ECHO's MerchantAmerica Donation Program, Donate.net and Contribute.com, then you have the option to send an automatic e-mail for every gift. That makes it simple and inexpensive.

But what about $5.00, sending out receipts for these amounts could be costly. It is possible that at the end of the year you could send out one gift receipt stating all of the individual gifts with a total. My preference is to do it on every donation. This keeps you in a standard receipting format so that every contributor gets the same treatment. It also reminds the donor that they can give to you again with an enclosed envelope that you provide.

What The IRS Says

In Revenue Procedure 90-12 section 3-2(b).02 states....a qualifying fund-raising campaign is one designed to raise tax-deductible contributions, in which the charity determines the fair market vaue of the benefits offered in return for contributions (using a reasonable estimate if an exact determination is not possible), and states in its solicitations (whether written, broadcast, telephoned, or in person) -- as well as in tickets, receipts, or other documents issued in connection with contributions -- how much is deductible under section 170 of the Code and how much is not.

If a charity is providing only insubstantial benefits in return for a payment, fund-raising materials should include a statement to the effect that: "Under Internal Revenue Service guidelines the estimated value of (the benefits received) is not substantial: therefore the full amount of your payment is a deductible contribution."

In other words, you must tell your contributors if they are receiving something of value -- like more than a bookmark, T-shirt, or other costing less than $7.60. You then deduct the items fair market value from the donation and report the remainder as their actual gift donation.