Hi,
Most nonprofits treat a donation receipt as a thank-you note – a nicety. However, if your receipts are missing a few specific words, the IRS can deny your donors’ deductions in full, even for gifts you both know were real. And donors who get burned at tax time don’t call to complain. They just quietly stop giving.
The rules are strict, specific, and almost nobody’s receipts actually meet them. If any of this is you, your donors are exposed:
- Your receipts thank people but never state whether they got anything in return
- You run galas, auctions, dinners, or tournaments where donors pay and receive something
- You’ve never checked whether your receipt says “no goods or services were provided”
- You send one year-end thank-you and assume it covers everyone
Here is how it actually works:
- For any single gift of $250 or more, your donor cannot claim the deduction at all without a written acknowledgment from you – and it has to be in their hands before they file, or it doesn’t count
- If they received anything in return – a gala seat, an auction item – the receipt must state its value and that only the amount above that value is deductible
- For any payment over $75 where the donor gets something back, you are legally required to give a disclosure statement. Skip it and the penalty is $10 per contribution, up to $5,000 per event
- Get the wording wrong and the donor’s deduction can be denied in full on audit – a real, deductible gift lost over a single missing sentence
- Here’s the sting: on the big-dollar receipts, you don’t get fined – your donor loses the deduction. Which is worse, because they’re the ones you can’t afford to lose
The fix is small and permanent. We correct your receipt and disclosure language once, build you templates for regular gifts and for event and auction gifts separately, and make sure every acknowledgment goes out in time to actually count. Your donors keep their deductions, and you keep your donors.
Reply to this email by Friday and we will set up a free 15-minute call with one of our senior nonprofit specialists. Forward us the last receipt you sent a donor, and we will tell you on the call whether it would survive an audit.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com