Tips to Prepare Tax Statements for 2022
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.
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 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)
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).
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.
To ask or not to ask? Do you solicit a gift with your tax statements?
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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