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Do Your Donor Receipts Measure Up?

July 24, 2015

Make sure your donor receipts are carefully written and accurate or the IRS could deny your donors’ deductions.

Be mindful that the language you use on receipts given in exchange for contributions is very important. If the IRS audits your donors, improper language could cause deductions to be denied, which can result in embarrassment and upset donors.

What should appear on a donor receipt?

Donors must receive a letter or receipt for any contribution of $250 or more. However, many organizations provide thank you letters to donors at all levels. Donors must have substantiation of donations in order to include those donations on their itemized federal tax returns, and a letter from the not-for-profit organization is the clearest document they can have to prove their donation. Your donor receipts should include the following items:

  • Full legal name of your organization,
  • Donor name,
  • Amount of a cash donation,
  • Description of any non-cash donations (but not the value!), and
  • Statement of whether or not benefits (goods or services) were provided, and if so, a good faith estimate of the value.

More about donor receipts

  • Donor receipts can be on paper or can be sent via email to the donor.
  • Take care with donor name. If a donor gives through a family foundation or business, make sure the letter is addressed to the entity that made the gift, not the individual.
  • You can use an annual summary to combine several contributions of $250 or more on a single receipt. As soon as possible after donations are received you should plan to issue receipts, but January 31 of the year following receipt of gifts is the absolute deadline.
  • Donors can use their pay stub or W-2 to support charitable deductions if the donor makes gifts to you through payroll deductions, and you can also use payroll information to provide an annual letter combining all contributions during the year.
  • If donors claim deductions based on unreimbursed expenses, they must keep detailed records of these expenses and should still have a written receipt from your organization.
  • The usual level requiring a donor receipt is $250. However, a letter or receipt must be given to donors who receive goods or services in return for payments exceeding $75 that are partially donations.

Donors have had their deductions denied by the IRS if information is not accurately disclosed, so be mindful of the language of your donor receipts to avoid unhappy donors! If you would like us to review your current donor receipts, please contact me or your KLR Not-for-Profit Services audit or tax advisor.

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