Nonprofit Donation Receipts: Everything You Need to Know
Donation receipts can be confusing, especially for smaller nonprofits. Depending on where your organization is located and the types of donations you accept, you have a unique set of rules and regulations you need to follow.
This article will break down everything you need to know about donation receipts to make the process as pain-free as possible for you.
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Here’s everything you need to know about Donation Receipts:
What is A Donation Receipt?
Donation receipts are written records that acknowledge that a gift was given to an organization by a legally qualified/eligible donor.
There are a variety of qualified/eligible donees, depending on your country and region. Here are a few examples:
- Registered 501(c)(3) Charitable Organization (US)
- Registered 501(c) Non-profit (US)
- Registered Charities (CA)
- Non-profit organizations (CA)
- Charity or Registered Nonprofit with an ABN # (AUS)
- Charity registered with ACNC with DGR status (AUS)
These are only a few examples of types of qualified/eligible donees across the globe. In the United States (US) alone, there are 29 different types of 501(c) organizations. However, what unites the different types of organizations is the need to issue a receipt upon receiving a donation.
Here is what should generally be included in a nonprofit donation receipt:
- The donor’s full name
- The nonprofit organization’s name
- Unique Donation ID
- Date of the donation
- The amount of gifts received
- Signatures from signing authorities
There are different rules regarding what to include in your receipt, depending on where you live. It is important to note that these rules and regulations can change.
It is best to go directly to your government’s websites to check for the exhaustive list of what to include. Details differ slightly when proving written acknowledgment in the US, a donation receipt in Canada, or a receipt in Australia.
What Does A Donation Receipt Look Like?
The Canadian Revenue Agency (Canada’s IRS) was nice enough to provide us with some examples of what a donation receipt should look like. Let’s take a look!
As you can see, this example outlines the necessary components of a donation receipt (e.g., the donor’s full name, the nonprofit organization’s name, Unique Donation ID, etc.).
Things can change a bit depending on the type of gift you receive. For example, if you receive a gift with an advantage attached or an in-kind donation, your receipt may look different.
Let’s take a look at how the Canadian receipt changes with an advantage attached.
There are a few new fields: total dollars received, the value of advantage, description of advantage, and the eligible amount.
To be clear, not all nonprofits need to have a receipt that looks just like the ones featured above, but your receipt must contain all of the information outlined by your local laws and regulations.
Try this free online receipt generator to create a donation receipt that’s right for your organization. A better alternative is a nonprofit management software platform like Keela. With Keela, you can customize and automatically send out donation receipts in the blink of an eye.
Why Are Donation Receipts Important?
Donation receipts are written acknowledgments that prove a charitable donation was made. They are beneficial to both the individuals who make contributions to your nonprofits and your organization itself.
Here’s how receipting is beneficial to your donors:
1. Tax Incentives
There are governmental incentivization programs for charitable giving in most countries and regions. Donation receipts are records of charitable contributions that provide donors with the documents they need to be eligible for these programs.
For example, in the US, you can generally deduct up to 50 percent of your adjusted gross income based on charitable contributions made, which reduces your taxes owed. Additionally, the UK has a Gift Aid program that incentivizes giving to charities and community amateur sports clubs (yes, they love soccer or football). This program allows these organizations to claim an extra 25p for every £1 you give. That’s a bang for your buck!
2. Donation Confirmation
By giving receipts to donors, you eliminate any uncertainty that their donation wasn’t processed. Your donors can rest easy knowing that their money is being put to good use. Also, donation receipts help donors keep track of their finances. In that sense, donors greatly appreciate receiving donation receipts without having to ask for them.
3. Stewardship Opportunities
Receipting is your nonprofit’s opportunity to begin the stewardship cycle. With donation receipts, you can send a heartfelt thank you message that will deepen the bond you share with your donors and encourage them to give again.
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Stewardship activities are touchpoints for nurturing your donor relationships and help to increase your donor retention rate. With this FREE template, you can map out your donor stewardship plan.
When Are Donation Receipts Due?
It’s best practice to always send a donation receipt after each donation.
Donors shouldn’t have to ask you to acknowledge their contribution. Given the benefits and opportunities it presents, receipting should be considered an essential practice for your organization.
While you could probably scrape by not providing receipts for a short period, donors cannot claim a tax deduction without written official confirmation, and they will be disincentivized to give.
Getting started with donation receipting can be challenging. Without the right systems in place, It can be time-consuming. Some nonprofits set a threshold for receipting.
For instance, you can decide to send donation receipts only to people who donate more than $20. However, as previously mentioned, the best solution is to invest in nonprofit management software that automates the process for you by sending receipts out immediately after a contribution is made.
Pro Tip: Keep in mind that for donations made in the US, donors must receive a written communication for any monetary contribution of less than $250 to be able to claim a tax return; for example, a thank-you note acknowledging the contribution. For single contributions of $250 or more, donors need a written acknowledgment, such as a donation receipt, to claim tax returns.
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What are the Requirements for Charitable Donation Receipts in the United States and Canada
There is no standard format for donation receipts; you can choose to send out letters, postcards, or online receipts.
However, as mentioned above, there are some required elements you always need to include when writing your donation receipts. Depending on the country where your nonprofit is registered, you’ll need to follow additional legal requirements.
5 Donation Receipt Best Practices
1. Store copies of donation receipts
It’s essential to have your own filing system. Keeping track of the donation receipts you’ve issued just makes good sense and keeps everything in order.
If you ever need proof of a donation, a copy of a receipt, or to reissue a receipt, your filing system will be your best friend. It doesn’t matter whether you store these records physically, digitally, or in both ways.
Pro Tip: If you store your donation receipts on a cloud-based system, download the records onto a physical hard drive at regular intervals (monthly, quarterly, or annually). This way, you always have a backup in case data is lost.
2. Use a unique serial number or a Donation ID
Giving each donation a unique serial number or donation ID is an easy way to keep your records organized. Serial numbers allow you to search your files with ease, associate groups of receipts with specific periods, and provide each receipt with an identity that encapsulates the rest of its information. A nonprofit software like Keela will create serial numbers and save you time and effort.
3. Keep formatting consistent
Whether you issue a donation receipt online or in person, make sure the format is consistent. With the help of a CRM, maintaining receipt consistency is easy, as your software will allow you to stick to the format of your choice.
If providing receipts in person, print out a receipt template and stick to it. This way, you won’t have to deal with multiple formats or random sheets of paper. You also reduce the risk of forgetting to collect information that your organization needs.
4. Send a “Thank You” with your receipt
Although the receipt process is very transactional, when you build strong relationships with your donors, you should look for every opportunity to be relational. By sending a thank-you letter or note along with the donation receipt, you can do just that.
Appreciative gestures transform an administrative necessity into an opportunity to build further goodwill. Receipts are nice, but they aren’t necessarily a great way to say “Thank You.”
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5. Be clear about what is tax-deductible
Different countries and regions have strict rules about what gifts can be tax-deductible. It is essential to be informed and transparent about what is and isn’t tax-deductible, as many types of contributions to nonprofits don’t have tax implications.
If you’re not sure about the rules in your country, check out your government website. The IRS in the US, the CRA in Canada, and the ATO in Australia all have different regulations about charitable giving tax incentives.
Pro Tip: Avoid putting a line on your tax receipt that indicates the gift will be tax-deductible. Oftentimes, donation receipt templates will include these lines at the bottom, which can be problematic when you inevitably accept a gift that isn’t tax-deductible.
Have a conversation with the donor in person after you’ve had an opportunity to do the research. Save yourself a headache down the line!
How to Issue Tax Receipts for Donations
There are two schools of thought when it comes to issuing receipts. The first says to issue them immediately after the donation takes place. The other says to issue them at the end of the year in a cumulative receipt. Both options are effective and have their pros and cons.
1. Issue donation receipts right after each contribution
When you issue a donation receipt right after each contribution, you help donors feel more engaged. The immediacy of your response will prove that your nonprofit is responsive and truly on top of things.
Also, issuing donation receipts right away may go a long way in soliciting future donations, as donors will remember the timeliness of your sincere gratitude. However, if you decide to issue receipts right away, you commit yourself to the process of constant receipting, even during times when it may be inconvenient.
2. Issuing donation receipts at the end of the year
When you issue tax donation receipts all at once, you can reduce the amount of overall admin work your accountant has to do within a given year. When every donation from an individual within a given year is consolidated into one record you have to send out fewer communications, saving some time.
Consolidating receipts allows donors to stay more organized. They will worry less about losing individual receipts that were issued to them earlier in the year.
However, the end of the year, also known as the giving season, is typically the busiest time for fundraisers. This means that your accountants may not have time to manage the mass production of receipts.
Also, when your donors file their taxes, there will be a variance in when they want their receipts. Some donors will wish to have their receipts immediately so they can apply for a tax benefit at a time that works best for them. It is helpful to send them receipts in advance of the tax-filing season.
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Pro Tip: Use Keela to automate the donation receipt process to save time, whether you issue receipts immediately or all at the end of the year. Book a demo today to learn more about Keela’s comprehensive software.
How Can I Make Issuing Donation Receipts Easier?
Once a donation comes in through an online donation form, Keela automatically generates the receipt with a donation ID, serial number, organization name, organization address, and signatures. As mentioned above, you can easily customize Keela’s donation receipt template to include a thank-you note.
Keela can pull information from the virtual gift to make the receipt. Information such as donor name and address, donation date, receipt date, receipt location, and the total donation amount.
The software automatically emails the receipt to the donor immediately after they donate. Alternatively, donors can opt to receive a cumulative receipt at the end of the year if they make a recurring gift.
There’s more! The best part of using Keela may be that these donation receipts are also linked to each individual’s profile, giving you a complete view of their giving history.
This automation saves time, relieves stress, and reduces human error while issuing flawless receipts!
Donation receipts can be confusing, but they are essential for your nonprofit fundraising strategy. First, make sure that you familiarize yourself with the donation receipt requirements for your country.
Then, invest in the right nonprofit tools, like Keela, to streamline the process. With more time in your day, you can get back to what matters most: building and fostering relationships with your donors.
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