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Creating End of Year Tax Receipts

The New Year has begun, and for most non-profits the busiest and biggest donation month has ended. All of the Thanksgiving, Christmas, and Year End appeals have been polished off. Time to sit back and relax right?

Well, not quite. For me January is always the busiest month of the year because this is when end of year donation receipts are sent out to donors. So I spend January pouring over our donor database correcting addresses, making sure donations are all recorded correctly, and getting everything set up with the printer and mailing house.

Now you don’t have to send out donation receipts. There is no law that requires non-profits to send them out unless the donor specifically requests. So you could save some time and money by not sending them out unless requested, or if during the year you included donation information on their thank you letter you can skip this.

I personally like to send end of year summaries to donors. It’s a good way of reminding them how much they have given and even if they aren’t going to use it for tax purposes most people seem to appreciate it.

There are two key aspects to every good donation summary letter. It must meet the IRS requirements for a donation receipt. And it must help maintain your connection with the donor.

Here’s a quick summary of the requiremnts listed in the IRS Publication 526 – regarding charitable contributions.

  • It must be written – or printed. No verbal receipts
  • It must include the amount contributed
  • It must state whether the donor received any goods or services for the donation
  • It must include the name of your organization
  • It must include the date of contribution

Other than these five things the letter can contain anything you want. I suggest a warm thank you and a nice note saying how happy you are to continue working with them through the next year.
Donation Receipt FAQ

Should a donation be recorded on the date received or the date on the check?
According to IRS Publication 526, p13, a donation should be recorded “at the time of it’s unconditional delivery.” In other words if it’s hand delivered then at the time of delivery. If it’s mailed by check then on the date of mailing, which would be the postmark date.

What should a donation receipt look like?
Anything you want. As long as you include the 5 items listed above. Make it fit the image of your organization. If you want to get fancy you can turn it into a 4 page appeal letter. If you want to save money it can be just one page. I suggest something similar to your letter head. Check out this sample End of Year Tax Summary for some ideas.

How do I value in-kind donations?
Don’t! You are in the business of helping people not estimating product worth. It is the donors responsibility to estimate the value of the items for tax purposes. All you have to do is list a description of the item. Leave the heavy work up to the donor.

If I included donation info on thank you letters for each donation do I still need to send a year end summary?
No. If your thank you letter contained all five of the points above you do not need to send a year end summary.

{ 17 comments… add one }

  • Rita January 11, 2011, 6:07 pm

    Can an end of year donation receipt be sent via email?

    • Justin Wandro March 18, 2011, 7:22 pm

      Rita,

      Yes, end of year donation receipts can be sent by email. While I send most tax receipts out by paper mail I also have many donors who request it just be emailed to them.

      I think it makes sense to send out e-mail receipts to people who donate online, because you’re probably much more likely to have there email address. While if you are receiving most donations via check or cash in the mail then you probably don’t have e-mail addresses associated with your donor profiles.

  • Dekyong Lhamo January 22, 2012, 6:15 am

    Are you required to sign a tax receipt for an individual if you do not have records of the transactions they are claiming? And are you required to sign a tax receipt for donations/in kinds that do not pass through your accounts?

    • Justin Wandro February 10, 2012, 11:28 pm

      Dekyong, you should only sign tax receipts for donations that you actually received. If I didn’t receive it, then I wouldn’t sign it. But, you better be right that you didn’t receive it because it’s going to make the donor really really mad if they really did give that donation.

  • MQ Dwyer February 1, 2012, 4:48 pm

    Is there a deadline? Am I too late to send these out on February 1?

    • Justin Wandro February 10, 2012, 11:32 pm

      MQ, as far as I know there is no deadline because the IRS does not require a non-profit to mail out a tax receipt. However, your donors will want the tax receipt to file their taxes. In my experience if you don’t send receipts out by the 3 week of January, you will start getting phone calls from donors looking for their receipts. So, it’s up to you to judge whether sending them out now would be too late to be helpful for your donors.

  • Rob February 2, 2012, 2:35 am

    Is there any software or program that makes it easy to automatically print out all the letters if you have a spreadsheet with the donor info? As oppose to typing the name and donor info into a thousand different letters and printing each one out? Would appreciate any info regarding this. Thanks!

  • Rob February 19, 2012, 12:23 am

    Thanks for the info one more question, I’m from Michigan and I’ve been told by people that it is law that nonprofits have to send out end of the year tax receipts, can you point me to any info where I can prove that you don’t? Thanks!

    • Justin Wandro February 21, 2012, 9:53 pm

      Rob,

      Here is the IRS publication that references acknowledgement of charitable contributions. http://www.irs.gov/publications/p557/ch02.html#en_US_2011_publink1000199971 Here is also a quick overview pamphlet http://www.irs.gov/pub/irs-pdf/p1771.pdf

      It’s pretty clear that an organization is not required to send out a tax receipt if it was not requested. However, I’d like to emphasize that it can be extremely beneficial to your relationship with your donors to send year end statements. It not only is helpful to the donor for tax purposes but it triggers an emotional response that connects their donations with your organization and it’s mission.

      The above applies only to the IRS and is true only on a federal level. I have no idea what, if anything, that the state of Michigan requires. This is also only in regards to direct donations, and does not include “Quid pro quo” donations, or donations in which the donor received something in return (i.e. concert tickets).

  • Joshua Carvalho February 21, 2012, 9:11 pm

    This is the best article on the web for creating end of year tax receipts. Thank you so much for creating this to help out us newbies.

    • Justin Wandro February 21, 2012, 9:29 pm

      Thanks Joshua. I’m glad you found it helpful.

  • Laura February 28, 2012, 12:04 am

    Is it a requirement that we include a donor’s contact information on a receipt? If we only have the first and last name, is that enough information, along with the gift date and amount? Thank you!

  • Jeff January 11, 2013, 11:06 pm

    Justin, what about contributions where FMV is fuzzy – for example, if someone were to purchase outright a piece of art created by a student served by a nonprofit? Could FMV be determined by the value of frames or other material costs that went into the art? Thanks!

    • Justin Wandro January 24, 2014, 2:48 pm

      Jeff, it’s up to the donor to determine fair market value. Your job is simply to provide acknowledgement that the item was received. Now, if the donor is asking for help, you of course want to do whatever you can to help, and that’s where I would connect the donor with a professional appraiser.

  • Randy A. January 24, 2014, 6:10 am

    This web page is a great resource! Thank you for all the info. I do have one question: If your nonprofit organization received a bequest (a member of a church passed away and left some money to the church) , would you send an end-of-year tax receipt letter to the executor of the estate?

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