Soapbox Engage Blog

Nobody likes paperwork, but some of it is actually important. Donor receipts are one of those necessary evils that nonprofit organizations need to pay attention to. Not only are they required by the IRS, if done correctly, sending donor receipts can be another great "touchpoint" with your valuable donors. And it doesn’t have to monopolize your staff’s time!

It’s critical for nonprofits of any size to develop a process to personalize and send donation receipts to their donors. We gathered all the essential information about donor receipts and some best practices to help you create an effective system for your organization.

While you're reading, it's important to note that you should consult your own legal and accounting professional before implementing any ideas listed here, and this should not be considered legal advice. Okay, with that, let's continue!

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6 Items You Should Include In Donation Receipts

A few years ago, the IRS cracked down, disallowing people to claim charitable donations on their tax returns because the donation receipt didn’t include the right information. As you can imagine, donors were not thrilled about that. They were probably significantly less likely to donate to those organizations again (and they’ll probably tell their friends about the situation, too).

It’s critical to include all the right information in a donation receipt so your supporters can claim the charitable deduction on their taxes and so your paperwork is in order.

Surprisingly, the IRS does not have a standard format for donor receipts. Still, they are pretty particular about what information you should include. Whether you send it in a formal receipt, on a postcard, or in a thank you note, here are the 6 items the IRS wants you to include.

1) The name of your nonprofit and the full name of the donor

Many organizations add their physical mailing address and EIN (Employer Identification Number). While it’s not required to include your physical mailing address, donors need to provide this information with their taxes. It’s a kind gesture to provide all that information in one convenient place for your supporters.

2) Contribution date

The IRS technically doesn’t require the donation date to appear on the donor receipt. They do require donors to keep accurate records that include donation dates. Many donors don’t keep detailed financial records like that. Offering this information is one way to serve your supporters and help them get the tax benefits they deserve.

3) A detailed description of noncash donations

If you are providing a donation receipt for noncash contributions, provide a detailed description of each item. It’s ok to group similar items together (like books or clothing), but try to be as specific as possible. If you receive stock donations, include the number of stock shares and the company name.

4) Donation amounts

At the risk of being too obvious, don’t forget to include the donation amount, especially if you receive a cash donation (actual cash, not just monetary donations by check or credit card).

There is a notable exception to this rule! Don’t include a cash value for noncash items. The donor is responsible for proving cash value. You might unintentionally undervalue or overvalue an item. Even if you are very knowledgable about the items, your organization should not assign a monetary value to donated items.

5) Clearly state whether goods or services were exchanged for the donation

Perhaps one of the most critical pieces of information to include on your donor receipts is whether or not the donor received something in exchange for their contribution.

Many organizations don’t include the right language on their donor receipts, causing the IRS to disallow deductions. It doesn’t have to be written in "lawyerese." A simple sentence like, "No goods or services were provided in exchange for this donation," is perfectly acceptable and satisfies the IRS requirements.

If your organization provides intangible religious benefits, be sure to include a statement about that. Something like, "The organization provided intangible religious benefits or services to the donor," works just fine.

6) The value of goods or services provided to the donor

Did you give something to your donors? It’s critical to include information about any products or services you offered. If your supporter gives more than $75, you must disclose the value of any goods or services you provided to them. Still, it’s a good idea to include that information in every circumstance, just to cover all the bases. Of course, you don’t need to report that you gave donors logoed pens, branded baseball caps, coffee mugs, or other small items of minimal value.

If you include these items, the IRS will be satisfied, and your donors can happily claim their tax deductions.

When are donation receipts required?

For monetary donations under $250, donors can use a bank record (a canceled check or bank statement) or a receipt from the charitable organization. If the gift is more than $250, the donor needs a written donation receipt from the nonprofit.

If your organization accepts noncash donations, there are some other benchmarks and rules about receipts you should know about.

Noncash donations under $500 in value do require a receipt. If the items were put in an unmanned donation bin, like Salvation Army or Goodwill drop-boxes, donors do not need a written receipt (even the IRS agrees that would be impractical).

Noncash donations over $500 in value require a donation receipt and a record of how and when your organization acquired the items. Noncash contributions that exceed $5,000 in value will need a written appraisal from a qualified appraiser.

Use donation receipts to connect with your donors

Don’t miss out on an opportunity to connect with your donors, say thank you, and continue to build the relationship. If you do it right, even sending your donation receipts can be another small way to care for your supporters!

Include a valid "from" address

If you send email receipts, be sure to include a valid email address in the "from" box and make the address as normal as possible. Many organizations opt to have their online donation receipts come from an email address of someone in their financial or accounting departments. It’s much better to receive an email from "Jenny@FeedEveryKid.org" than from a nondescript email address.

Put a little pep in your subject line

Nothing is less peppy and fun than an email that reads, "here’s your tax receipt." You don’t have to go overboard or spend loads of time coming up with witty subject lines, but spicing it up a little bit goes a long way and shows your donors that you pay attention to the small details.

Personalize it

When you send a donation receipt via email or snail mail, you really should include the donor’s name. After all, tax information is personal! Using their first name reassures them that the data is accurate and trustworthy. It also communicates that you don’t see their donation as "one among the masses."

Take the time to recognize each donor by name, even in printed communication and especially when talking about boring but very personal information like taxes and donation amounts.

Tips to show your donors some love with their receipts

A few small changes to your donor receipt system will make a big difference to your donors!

Always say "thank-you" with your donor receipt, but don’t send those messages separately. Some organizations use separate email systems to send "thank-you" messages and donor receipts. This might be convenient for the organization, but it can become confusing for the donor. Instead, start your donor receipt email with a heartfelt thank you message, and attach the receipt information at the bottom.

And, don’t forget to provide receipts for every donation. Even though the IRS only requires receipts for donations over $250, it’s best to provide a receipt for every gift.

Your donors will also appreciate an annual summary. Again, this is not required, but it is beneficial for donors when they are doing their taxes. Most organizations send summaries in January after they finish processing year-end donations.

Taking these small steps demonstrates that you care about your donors and are willing to take a few extra steps to make their paperwork lives a little easier.

We are sure that taking these steps will make sure you send top-notch donor receipts. Here are three more resources to help you grow your nonprofit.

• 4 Ways Donation Transparency Increases Fundraising Success: Speaking of paperwork, another way to build trust with your donors is to increase your financial transparency. Here are some practical ways you can improve your financial transparency for your donors.
• Don’t Choose A Nonprofit CRM Without These 6 Features: A CRM system will help you streamline your communication with supporters, including sending donor receipts. Here’s a guide to help you choose the right CRM system for your nonprofit.
• Accept Donations Online: 8 Effective Tools for Nonprofits: Accepting online donations is critical for nonprofits. Fortunately, it’s easier than ever to process online donations quickly and securely. Here are 8 online donation tools that we think are great.