posted October 14, 2015
Charitable Contribution Acknowledgements - What's Required?
by Casey R. Good, CPA, Senior Associate
Taxpayers generally contribute to charitable organizations with the expectation that they will be able to take a deduction on their taxes. Your organization may send thank you notes to encourage future gifts, but is a simple acknowledgement enough for donors to claim a charitable contribution deduction on their tax return? It depends on how much and the nature of the contribution received.
If a monetary donation is made for which the organization does not provide a good or service in return, the donor must have a bank record or it is up to the donor to obtain written acknowledgement of the gift (either hard copy of electronically) before they can claim a charitable contribution deduction on their federal tax return. If the donation is greater than $250, a simple thank you note from your organization will not suffice. To help your donors, provide a written acknowledgement that includes the following:
- name of your organization
- amount of cash contribution
- description (but not the value) of any non-cash contribution
- statement that no goods or services were provided by the organization in return for the contribution
A separate acknowledgement can be provided for each contribution exceeding $250, or an annual acknowledgement can be provided if more practical. These should be provided to donors no later than January 31 of the year following the donation for tax return purposes. To alert donors to the importance of this acknowledgement, include a phrase such as “please keep this written acknowledgement of your donation for your tax records.” However, be cautious of unintentionally providing tax advice to your donors with such statements.
If your organization receives a quid pro quo contribution, when a donor makes a payment exceeding $75 that is comprised of both a contribution and a good or service provided by the organization, you are required to provide a written disclosure. For example, if the organization hosts a dinner valued at $30 and charges $100, the donor’s tax deduction may not exceed $70. However, because the total amount paid was greater than $75, the organization must provide a disclosure statement to the donor even though the value of the contribution does not exceed $75. The disclosure statement provided to donors should include:
- a statement informing the donor of the amount of the contribution that is tax deductible - limited to the excess of the contribution less the fair market value of goods or services received
- a good faith estimate of the fair market value of the goods or services
The disclosure must be in writing and made in a manner that is likely to come to the donor’s attention. If the organization does not provide written disclosures, they can be penalized $10 per contribution, not to exceed $5,000 per event or mailing.
Detailed information and examples of the requirements can also be found in IRS Publication 1771,Charitable Contributions – Substantiation and Disclosure Requirements,available at https://www.irs.gov/pub/irs-pdf/p1771.pdf.
The content of these pages is for general information purposes only and does not constitute advice. Heinfeld, Meech & Co., P.C. tries to provide content that is true and accurate as of the date of writing; however, we give no assurance or warranty regarding the accuracy, timeliness, or applicability of any of the contents.