Is your homeschool group fortunate to have received a donation this year?
It’s important you you to know what your organization needs to do confirming contributions.
Only if your homeschool organization is a 501(c)(3) tax exempt organization, can your donor deduct the donation on their tax return.
If your group does not have 501(c)(3) status, you should thank the donor, but not give them a tax deductible receipt.
(Not sure if your group is a 501(c)(3) tax exempt organization? Read more here…)
Here’s some advice from a fellow CPA, Dennis Walsh on confirming contributions.
A prompt thank you letter that includes what donors need for tax purposes is an effective way to keep your contributors up to date on the great work you’re doing. The IRS says it’s okay to send this information by email. When different financial duties are assigned to a variety of people, the chances increase that any misappropriated donations will be detected more readily.
Here’s a sample of the essential information to include in your thank you letter:
“Name and address of nonprofit
“Donor name and address
“We wish to thank you for your 20xx contribution of cash in the amount of $500.00. We did not provide any goods or services in exchange for this contribution. XYZ Nonprofit is an organization exempt under Section 501(c)(3) of the Internal Revenue Code and contributions are deductible to the extent allowed by law.”
Remember to separately list any single contribution of $250 or more. If the donation is other than cash, describe the property but do not indicate a value.
If you provided the donor with goods or services as part of the contribution, you could delete the second sentence in the above example and substitute the following:
“We provided you with two theater tickets with a fair market value of $50. Your tax deduction is limited to the amount of cash and value of any property contributed, reduced by the value of any goods or services received in return. Accordingly, the amount eligible for a federal income tax deduction is $450.”
There are exceptions for items of minimal value such as pens and mugs. See the discussion regarding “quid pro quo” donations in IRS Publication 1771.
Dennis Walsh, a certified public accountant who lives in Jamestown, North Carolina, is the author of Legal and Tax Issues for North Carolina Nonprofits. Through the Deborah and Dennis Walsh Foundation, he provides volunteer technical assistance to help empower community nonprofits. He can be reached at drwalsh at triad.rr.com