• Skip to main content
  • Skip to footer

Araize

Total Software Solution for Nonprofits

  • HOME
  • PRODUCTS
    • ACCOUNTING
      • GENERAL LEDGER
      • ACCOUNTS PAYABLE
      • ACCOUNTS RECEIVABLE
      • DIRECT COST ALLOCATIONS
      • INDIRECT COST ALLOCATIONS
    • FUNDRAISING
    • PAYROLL
    • FASTFUND ONLINE LT
  • PRICING
    • ACCOUNTING
    • FUNDRAISING
    • PAYROLL
  • RESOURCES
    • NONPROFIT ACCOUNTING COURSE
    • EDUCATION SERIES
    • ADVISOR
    • NONPROFIT ACCOUNTING PRO
  • BLOG
    • ACCOUNTING FOR NONPROFITS
    • NONPROFIT FUND ACCOUNTING
    • FUNDRAISING STEWARDSHIP
    • NONPROFIT PAYROLL
  • LOGIN
  • ORDER

Feb 24 2016

Protect Your Donors By Substantiating Charitable Gifts

Your donors are the crux of your organization. Without their financial support and other contributions, your organization could not survive. For this reason, you want to make sure that you reciprocate by substantiating charitable gifts they can deduct on their income tax returns.

Protect Your Donors By Substantiating Charitable Gifts araize.com

Share this Image On Your Site



Please include attribution to araize.com with this graphic.

The IRS provides a number of guidelines or “substantiation rules” that must be followed in order to claim a deduction.

No Documentation, No Tax Deduction

Just how picky is the IRS regarding the documentation it needs to substantiate charitable gifts? It turns out pretty picky, indeed.

Consider the case of Mr and Mrs Durden. In 2007, the Texas couple made $25,171 in contributions to their church. They had written checks documenting their donations, and the church sent them a written acknowledgment of receipt. But because the gift acknowledgment did not mention whether the Durdens had received any goods or services in exchange for their contributions as required by the IRS, the deduction was not allowed.

Best Ways To Increase Nonprofit Sustainable Revenue - Free Ebook - araize.com


Free eBook Download: How to Increase Nonprofit Revenue Using For-Profit Strategies


The couple then obtained a second receipt dated June 21, 2009, from their church which stated that they had not in fact received any goods or services in exchange for their donations. But, this second attempt was rejected as well. The IRS responded that it failed to meet their “contemporaneous” requirement which states that the letter or receipt must be received by the donor at the time of the donation. (This generally means before the tax return for that year is filed)

Ultimately, the Tax Court upheld the IRS’s decision to refuse the deduction.

Your donors and their gifts are the lifeblood of your organization. Return your appreciation of their support by ensuring that you are in full compliance with the IRS.

Know the IRS’s Substantiating Charitable Gifts Rules

To help ensure that your donors do not get into to trouble with the IRS, your organization needs to do its part to be in full compliance with the substantiation and record keeping requirements. These requirements vary depending on the amount and type of the donation made.

Nonprofit Accounting Course - araize.com


Nonprofit Accounting Course: Learn essential skills to strengthen accountability and avoid costly mistakes. Get in-depth training on fund accounting, budgets, financials and more.


The full details of these requirements can be found on the IRS website. Below is a brief rundown:

For cash donations under $250:

  • If no goods or services were provided in exchange, then a canceled check or credit card receipt is required.
  • If in kind donations of any goods or services were provided in exchange for a donation of $75 or more, your organization must provide a contemporaneous written acknowledgment that includes a description and good-faith estimate of the value of the goods or services.

For cash donations greater than $250:

  • A contemporaneous written acknowledgment from your organization is required for each individual donation made by the donor.

For non-cash donations greater than $250:

  • A contemporaneous written acknowledgment from your organization is required for each individual donation made by the donor. This acknowledgment should include the following:
    1. A description of the property
    2. A statement as to whether the recipient organization provided any goods or services in exchange for the gift
    3. If goods or services were provided, a good faith estimate of the value

For non-cash donations between $500 and $5,000:

  • Like the smaller non-cash donations above, a contemporaneous written acknowledgment from your organization is required for each individual donation made by the donor.
  • The requirements for non-cash donations valued over $500 include attaching a completed Form 8283 to the donor’s tax return.

For non-cash donations greater than $5,000:

  • All non-cash donations that are valued at more than $5,000, additionally require that the donor obtain an appraisal from an independent third-party.

Schedule a FastFund Online Demo: Learn more about our unique software approach to nonprofit accounting, payroll and fundraising.


Bottom Line

Your donors and their gifts are the lifeblood of your organization. Return your appreciation of their support by ensuring that you are in full compliance with the IRS. Let us know other ways your organization substantiates donor gifts?

Want to read more? Check out these insightful articles:

  • What Is Nonprofit Stewardship and Donor Designation
  • New Tax Laws Affect Charitable Contributions
  • New FASB Rules for Nonprofits: Are You Ready?
  • Tips To Make Year End Donor Letters the Gift That Keeps On Giving
  • In Kind Donations: Guide to What Nonprofits Need to Know
  • Nonprofit Funding Sources: Top 4 Revenue Streams

Did you find this article useful? We welcome your thoughts and comments.

Written by Joseph Scarano · Categorized: Fundraising Stewardship · Tagged: Charitable Gift Deductions, Charitable Gifts, Fundraising Software, Nonprofit Stewardship

About the Author

Joseph Scarano is the CEO of Araize, Inc., developers of cloud-based FastFund Online Nonprofit accounting, fundraising and payroll software solutions to help your nonprofit become more transparent, accountable and sustainable.

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Footer

PRODUCTS
Nonprofit Accounting

Nonprofit Fundraising

Nonprofit Payroll

FastFund Online LT

EXTRAS
Payroll Calculator

SALES
FAQs

Testimonials

TRAINING
Getting Started

Training Request

Training Webinars

Nonprofit Accounting Course

COMPANY
About

Contact

Support

Partnership Programs

Authorized Partners

Referral Reward Program

LEGAL
Privacy Policy

GDPR Policy

Terms of Use

Security Policy
  • Email
  • Facebook
  • LinkedIn
  • Phone
  • Twitter
  • YouTube

© 2022 Araize, Inc. All Rights Reserved.
Privacy Policy