With contributions from Sara Love
No doubt your mother impressed on you the importance of acknowledging gifts with a written thank-you.
Well, it’s no different for your organization. Providing your donor with a written donor acknowledgment letter that acknowledges the gift is essential. And not just to satisfy the IRS, although that is an important consideration.
Donor acknowledgment letters are good organizational etiquette and they also provide an opportunity to communicate additional, personalized information directly to your donor.
A donor acknowledgment letter is a written form of receipt that a not-for-profit organization must provide to donors who contribute more than a $250 in a single donation, according to the IRS.
Your organization’s donors need these written acknowledgments (or a bank record, such as a canceled check, for smaller amounts) in order to claim a charitable deduction on their personal tax returns.
When to Provide a Donor Acknowledgment Letter
You should provide your donor’s acknowledgment contemporaneously. This doesn’t mean you have to provide it at the time the donation is made.
The IRS requires that it be given by the date the donor files his or her tax return — or the date the return is due, including extensions, if earlier. Typically, the letter is provided no later than January 31 of the year after the donation was made.
What to Include in the Letter
At a minimum, your letter must include the following elements to satisfy IRS requirements:
name of your organization
date you received the donation
amount of any cash contribution, including checks, gift cards, and marketable securities (at the quoted price at the time of the donation)
description of any noncash contribution(s), but not the related value
statement that no goods or services were provided in exchange for the contribution, if true
What Not to Include in the Letter
It is critically important that you do not provide a value for any noncash contribution from the donor in your acknowledgment letter. It is your donor’s responsibility to estimate the value of any noncash contribution.
Examples of Required Content
A thank you letter for a cash donation, no goods received:
“Thank you for your cash contribution of ($999) that (Organization) received on (Date). No goods or services were provided in exchange for your contribution.”
A thank you letter for a cash donation, goods or services received:
“Thank you for your cash contribution of ($000) that (Organization) received on (Date). For your contribution, we gave you a DVD with an estimated fair market value of $00.”
A thank you letter for receipt of a non-cash item:
“Thank you for your contribution of an antique painting that (Organization) received on (Date). No goods or services were provided in exchange for your contribution.”
In addition to satisfying tax requirements, consider personalizing your thank you letter.
You can make your donor acknowledgment letter informative and even fun. It represents your organization so it’s best practice to ensure that it stands out and makes your donor feel special. Let your donors know what your organization is doing, invite them to upcoming events, or include personal stories and quotes from volunteers. And show your donors what your organization stands for and what you believe in.
Providing donor acknowledgment letters is always a great idea for your donors.