October 17, 2023 by Jenna Spinelle
September 18, 2023 by Nancy Rosenbaum
Now that the 2022 tax year has come to a close, it’s time to review your plan for the tax receipts you’ll provide to donors for gifts made in 2022.
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 fewer than 12% of Americans now itemize their tax returns.
These tax statements do need to follow the IRS guidelines, and the relevant points are highlighted below.
When preparing tax receipts, take a moment to review the IRS Guide for Charitable Contributions: Substantiation and Disclosure Requirements (Publication 1771, last updated 03/2016). 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). To be deemed insubstantial, the Fair Market Value can not exceed the lesser of 2% of the payment or $117; or…
Meets the following criteria: The donation is at least $58.50, and the thank-you gift bears your station’s name and/or logo and is valued at no more than $11.70.
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.
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.
To review these details, see https://www.irs.gov/pub/irs-drop/rp-21-45.pdf (pg 19)
According to IRS Guide for Charitable Contributions: Substantiation and Disclosure Requirements, the IRS requires the following information:
Other details from the IRS:
NOTE: The IRS is very behind on releasing the 2021 990s for charities on the IRS website. If you have donors or institutional funders who question the lack of updated 990 available for your station, please refer the questions to media resources explaining the delay as an issue with the IRS and not with your organization.
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. If your organization doesn’t have many engagement touch-points throughout the year (think newsletters and other non-ask communications), you should consider using your tax statements primarily as a stewardship opportunity to connect with and thank donors for their support. It’s even better to include a separate note or letter with the statement outlining the impact of the donor’s support and looking forward to their continued partnership with your station.
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