Tips to Prepare Statements for Tax Year 2024
As the 2024 tax year comes to a close, it’s time to review your plan for the tax receipts you’ll provide to donors for gifts made in 2024.
These tax statements have become more of an opportunity to steward donors and show appreciation for the impact of their generosity rather than simply outlining the information donors need to claim a tax deduction, since nearly 9 in 10 Americans take the standard deduction on their tax returns.
These tax statements must follow the IRS guidelines, and the relevant points are highlighted below.
Review the Rules
When preparing tax receipts, take a moment to review the IRS Guide for Charitable Contributions: Substantiation and Disclosure Requirements (Publication 1771, last updated 11/2023). Here’s what you should know:
Donors are responsible for maintaining a bank record or written communication for donations of less than $250 and a written acknowledgement from the donee for donations of $250 or more for which they intend to claim a deduction on their tax return.
Your station or organization is responsible for providing written disclosure to donors who receive goods or services in exchange for a single donation of $75 or more. This written acknowledgement must be “contemporaneous” which is generally understood as being sent before the donor files their tax return. Greater Public recommends all tax statements are sent by January 31st.
There is a “Token Exception” for “insubstantial goods or services” (such as a thank-you gift). For taxable years beginning in 2025, to be deemed insubstantial, the Fair Market Value can not exceed the lesser of 2% of the payment or $136.00; or…
Meets the following criteria: The donation is at least $68.00, and the thank-you gift bears your station’s name and/or logo and is valued at no more than $13.60.
Your station is required to provide a written disclosure or receipt for donations of $75 or more that are partly for goods or services and partly for a donation. Your station must provide a good faith estimate of the fair market value of the item(s). This is referred to as a “Quid Pro Quo” contribution.
Here is how the token exception works: If you offer small “token” gifts in exchange for a donation you do not have to document these as a reduction in tax-deductibility if these three things are true:
- The donor gave at least $68.00
- The item bears the organizations name or logo (shirt, mug, socks)
- The item does not cost more than $13.60
Note: The IRS makes a distinction between the cost of the item to the organization and the fair market value of the item, your station needs to do the same when creating tax statements for donors by listing the fair market value.
Special note for stations heavily promoting the $5/month sustainer giving option: The donation amount of $68.00 is now higher than the annual $5 sustainer gift. This means that if the “thank-you gifts” you send to donors cost in excess of $13.60, that should be documented in your tax statement and not treated as a token exception.
To review these details, see page 17 of this document.
What information should you include on a tax statement?
According to IRS Guide for Charitable Contributions: Substantiation and Disclosure Requirements, the IRS requires the following information:
- The name of organization
- The amount of cash contribution
- A description (but not the value) of non-cash contribution
- A statement that no goods or services were provided by the organization in return for the contribution, if that was the case; or a description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution.
Other details from the IRS:
- The IRS defines “good faith estimate” as follows: “An organization may use any reasonable method to estimate the fair market value (FMV) of goods or services it provided to a donor, as long as it applies the method in good faith. The organization may estimate the FMV of goods or services that generally are not commercially available by using the FMV of similar or comparable goods or services. Goods or services may be similar or comparable even if they do not have the unique qualities of the goods or services being valued.”
- A separate acknowledgment may be provided for each single contribution of $250 or more, or one acknowledgment, such as an annual summary, may be used to substantiate several single contributions of $250 or more.
- There are no IRS forms for the acknowledgment. Letters, postcards or computer-generated forms with the above information are acceptable. (Most stations now send statements electronically or as a mailed letter. We do not recommend postcards).
How can my tax statements help me with my donors?
Nearly every station could be doing more strategic engagement with their donors. Donors are telling us and philanthropy researchers that they don’t understand the impact of their gifts, and that they do want to know more. Annual tax statements, by mail or email, are an opportunity to include a touch-point. As donor retention rates decline, it is critical to connect with and thank donors for their support. Include a note, report or letter with the statement outlining the impact of the donor’s support, stating that you look forward to their continued partnership with your station.
Over time, more organizations are asking for donations as part of their tax statements, and finding success. We recommend testing the addition of an appeal/ask as part of your tax statements, like an upgrade request to sustaining members.
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