When a transaction is completed there is always a document that acknowledges it. Typically it comes in the form of a receipt. Nonprofits issue a written acknowledgment called a donation receipt, a 501c3 donation receipt, to be precise. Unlike any other form of acknowledgment or receipt, the 501c3 donation receipt is considered to be very important to donors with respect to tax deductions.
This story will focus on the different types of donation receipts a nonprofit should know about.
What are Donation Receipts?
A donation receipt is an acknowledgment of a donor’s gift towards a charitable cause. The donation receipt is often given in the form of a letter. The letter expresses the nonprofit’s gratitude for the contribution made by the donor and provides pertinent information required by the donors for tax purposes. While the former is crucial to establish a long-term relationship with the donor, the latter is essential for donors who want to use the receipt when filing their taxes.
The Format of a Donation Receipt
Since it is a receipt that has to be used for tax purposes, it has to follow a certain format given by the IRS. The governing body will not recognize the receipt as official documentation and will reject it if it does not contain the pertinent information. This is something donors do not want. All donation receipts should follow a specific format and they must include the following information.
- The organization’s name
- The date of the donation
- The donor’s name
- The type of contribution made, i.e. cash or kind
- The value of the contribution
- Any additional information to specify an exchange for the donation
- Name of the authority and their signature
- A statement that confirms that the nonprofit is indeed a registered 501 (c)(3) organization and the nonprofit’s federal tax identification number
The last one is especially important as it validates the authenticity of the donation receipt. If a nonprofit has not registered with the federal government or has to check its status as a 501 (c)(3) organization, it should do so immediately.
How Can Nonprofits Provide Donation Receipts to Donors?
There are many ways to give donors a receipt, however, this documentation is also the only form of communication that donors will thoroughly look at. This means that there is a good opportunity for nonprofits to showcase the work they are doing and to engage with their donors directly.
It is for this reason that nonprofits should use a good design template for their donation receipts. Impressions matter and if it is for a person who donates regularly, it is even more important.
Organizations can also choose to get creative, after all, it is not exactly a plain receipt. The organization can add content in the form of pictures, blogs, and videos to catch the attention of their donors. If it is captivating enough, donors will get the message and will feel compelled to continue contributing.
The Six Types of Donation Receipts
Many receipts can be classified as donation receipts, here are some examples.
Charitable donation receipts
This is a receipt for any donation made by a donor that signifies that their gift has been received. It can be in the form of a letter, an email, or a receipt form. These receipts contain all the pertinent information necessary for tax purposes. If the gift exceeds an amount of 250$ it is considered as a charitable donation receipt.
In-Kind Donation Receipt
When the gifts come in the form of goods and services, in-kind donation receipts are issued. These receipts signify that there was no monetary transaction involved. When gifts are given in the form of goods, it has a monetary value and thus the receipt can be used for tax purposes. Whereas, if the gift is in the form of a service, it is not tax-deductible. In the case of goods received as gifts, their value is determined by the donor and not the nonprofit. This receipt should contain a detailed description of the gift.
Cash Donation Receipt
This is a receipt that is made when a donor makes their contribution through cash. This cash receipt legitimizes the transaction and is a document that the donor can use for deducting against taxes. Such receipts are only made at the request of the donor.
Stock Gift Donation Receipt
A stock gift donation receipt is made when a donor gives a nonprofit a contribution in the form of stocks of a corporation. The receipt contains information such as the number of shares of stock and the name of the company. It cannot, however, describe or ascertain the value of the stocks. Instead, a follow-up letter that contains the value of the shares is considered good practice.
Silent Auction Receipts
This is provided to every attendee that purchases an item during a silent auction hosted by the nonprofit. It contains information such as the name of the attendee, the name and value of the goods they purchased, the name of the organization, and the date of the event.
Year-End Donation Receipts
This receipt is very important, it is something that every nonprofit should send to a donor. It is sent to donors who contribute regularly and nonprofits are required to do so by federal law. It also allows donors to deduct their donations from any taxes. Donorbox is a tool that every nonprofit should look into. With Donorbox, organizations can easily send year-end donation receipts to their donors with a single click.
Nonprofit organizations may be required to furnish these receipts at any given time. Organizations must stay prepared and keep donation receipts ready for donors. To make this process hassle-free, nonprofits should sign up with fundraising platforms such as Donorbox which can issue one-off donation receipts as well as year-end receipts seamlessly to their donors.