Tips to Prepare Tax Statements for 2020

Membership, Major Giving, calendar year-end, tax statements

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The new year is not just a busy time to map out your upcoming fundraising objectives, it’s also time to start planning for tax receipts for donors' gifts made the prior year. And while best practice is to refrain from asking for a gift with the statement, this is an opportunity to thank your major, mid-level, and sustaining donors for a year of support.

The 2020 CARES Act had two important provisions for tax deductibility for donor gifts in 2020. As of legislation signed on December 28, 2020 those provisions have been extended to 2021. First, charitable contributions up to $300 in 2020 are considered an “above the line” deduction on donors’ taxes. Second, donors may now claim a charitable deduction up to 100% of their Adjusted Gross Income for cash gifts to nonprofits. There are no significant changes that should impact the compliance component of the tax statements provided to donors. However, compliance isn’t the only concern. Tax statements are a way to engage with donors and be of service to them regardless of how they file their tax return.

The strength of public media is that our supporters use and place a high value on the service stations provide. So, with that lens, strengthening that connection by practicing good stewardship is paramount.

Review the Rules

Review the IRS Guide for Charitable Contributions: Substantiation and Disclosure Requirements (Publication 1771). It’s important to take a look before you get started so you’re up to speed. Publication 1771 was last updated 03/2016.

Here’s what you should know as you prepare statements for 2020:

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tax receipts

Donors are responsible for maintaining a bank record or written communication for donations of less than $250 and a written acknowledgement from the donee for donations of $250 or more for which they intend to claim a deduction on their tax return.

Your station or organization is responsible for providing written disclosure to donors who receive goods or services in exchange for a single donation of $75 or more.

There is a “Token Exception” for “insubstantial goods or services” (such as a thank-you gift). To be deemed insubstantial, the Fair Market Value can not exceed the lesser of 2% of the payment or $112; or...

Meets the following criteria: The donation is at least $56.00, and the thank-you gift bears your station’s name and/or logo and is valued at no more than $11.20.

Your station is required to provide a written disclosure or receipt for donations of $75 or more that are partly for goods or services and partly for a donation. (The IRS uses concert tickets as an example.) This is referred to as a “Quid Pro Quo” contribution.

To review these details, see IRS Memo RP-18-57- Page 21, section .34.

What information should you include on a tax statement? According to IRS Guide for Charitable Contributions: Substantiation and Disclosure Requirements, the IRS requires the following information:

  1. The name of organization
  2. The amount of cash contribution
  3. A description (but not the value) of non-cash contribution
  4. A statement that no goods or services were provided by the organization in return for the contribution, if that was the case; or a description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution.

Other details from the IRS:

  • A separate acknowledgment may be provided for each single contribution of $250 or more, or one acknowledgment, such as an annual summary, may be used to substantiate several single contributions of $250 or more.

  • There are no IRS forms for the acknowledgment. Letters, postcards or computer-generated forms with the above information are acceptable. (Most stations now send statements electronically or as a mailed letter. We do not recommend postcards).

  • An organization can provide either a paper copy of the acknowledgment to the donor, or an organization can provide the acknowledgment electronically, such as via an email addressed to the donor.

And, of course, you should consult with your tax preparer or counsel before instituting these recommendations. It’s become more difficult to locate this information in IRS memos and briefs than in previous years.

tax receipts

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