Accepting contributions for a needy family

Hi Carol,
We just suddenly lost a dad from our homeschool co-op.  He leaves a wife and 6 children.  We have been receiving donations for them left and right through PayPal.  We will also start receiving checks from various people and churches.
As a 501c3 organization, what is our responsibility with donation letters and such?  For PayPal payments, I’ve been forwarding the receipt to the donor, thanking them for their donation and reminding them to hold on to their PayPal receipt for tax purposes as we are a 501c3 and their donation is tax deductible.
MG in NJ

So sorry for the loss of one of your fathers. How horribly sad.

What are you doing with these contributions? Are you passing them along to the family who lost their father/husband? I imagine that you are and that is very kind of you, but then these are not tax deductible donations. These contributions are gifts to the family (funneled through your co-op). Gifts to an individual family are NOT tax deductible donations to the donor.

The IRS rules for tax deductible donations are quite clear: contributions earmarked for a certain individual (or family) including those that are needy or worthy are not deductible.

IRS Publication 526

Contributions to Individuals

You can’t deduct contributions to specific individuals, including the following.

Contributions to individuals who are needy or worthy. You can’t deduct these contributions even if you make them to a qualified organization for the benefit of a specific person. But you can deduct a contribution to a qualified organization that helps needy or worthy individuals if you don’t indicate that your contribution is for a specific person.

The reason the donors funneled these gifts through your homeschool organization is that they want a tax deductible receipt, but you should not give the donors a tax deductible receipt for these gifts that are designated to go to the specific family.

My advice at this point is to thank people for their contributions, but do not give out tax deductible receipts. Some nonprofit experts advise that you tell the donors that their gift is not a tax-deductible contribution.

 

P.S. You might want to contact The Homeschool Foundation, a benevolent fund established by Home School Legal Defense Association (HSLDA). They have a fund just for widows to help purchase curriculum.

Carol Topp, CPA
HomeschoolCPA.com

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