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The Internal Revenue Service (IRS) sets clear guidelines for acknowledging charitable donations, as outlined in Publication 1771. Here are the key points:
Cash Donations Below $250: For cash donations under $250, a receipt is not legally required. However, the donor must have a bank record or written communication from the charity containing its name, the date, and the amount of the contribution to claim it as a tax deduction.
Cash Donations of $250 or More: For single cash donations of $250 or more, the IRS requires a written acknowledgment from the nonprofit organization. This acknowledgment must include the full legal name of the organization, the date of the donation (for checks, use the date the check was written), the amount of the cash contribution, a statement that no goods or services were provided by the organization in return for the contribution, or a description and good faith estimate of the value of goods or services, if any, that were provided in return for the contribution.
Non-Cash Donations: For non-cash donations, the IRS requires a receipt regardless of the donation's value. However, the donor is responsible for estimating the value of the donation when claiming it on their taxes. If the non-cash donation's value exceeds $5,000, a qualified appraisal must be included with the donor's tax return.
Quid Pro Quo Contributions: If a donor makes a payment exceeding $75 and receives goods or services in return (quid pro quo contribution), the nonprofit organization must provide a written disclosure statement. This statement must inform the donor that the amount of the contribution deductible for tax purposes is limited to the excess of the contribution over the value of goods or services received and provide a good faith estimate of those goods or services' value.
These acknowledgment receipts or written disclosures must be provided to the donor no later than January 31 of the year following the donation. However, it's not just about compliance with IRS regulations. It is best practice to also provide a donation acknowledgment as quickly after the donation was received as possible. This helps maintain transparent and positive relationships with donors, ultimately leading to a more successful, sustainable nonprofit organization. However, given the complexity of tax laws, always consult with a tax professional to ensure full compliance with all requirements.
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