The IRS sets out that acknowledgments must be provided “in writing, at the time of solicitation or when the payment is received, and in a way that will come to the attention of the donor,” according to IRS Publication 1771.
For the letter to be considered “contemporaneous” with the contribution, “a donor must receive the acknowledgment by the earlier of: the date on which the donor actually files his or her individual income tax return for the year of the contribution; or the due date (including extensions) of the return.”
Generally, most churches provide written acknowledgment by January 31 of the year following the receipt of the contribution.
The IRS requires that churches and other tax-exempt organization send a formal acknowledgment letter for any donation that is more than $250. The donor will use this letter as proof of his or her donation to claim a tax deduction.
The acknowledgment to the donor should include the following:
- Tax-exempt status statement: Statement that the organization is a 501c3 tax-exempt organization. Include the EIN in case the donor wants to check the tax-exempt status.
- Name of the church and name of the donor
- Date of the contribution: The date the donation was received.
- Contribution Details
– For cash (checks, credit card, payroll deduction): The amount of the contribution that was received.
– For non-cash gifts: A description (but not the value) of the non-cash contribution.
- Statements – Good Faith Estimates of Value of Goods or Services. Ask: Did the donor receive any goods or services in exchange for the gift?
- Include a statement that no goods or services were provided by the organization in exchange for the contribution if that was the case.
- If any goods or services were provided by the church in exchange for the contribution, include a description and good faith estimate of the value of those goods or services. (Example: A fundraising dinner event where some of the funds received from the donor pays for the actual dinner, while the rest is a donation.)
- If the goods or services that were provided to the donor were insubstantial token amounts, note that, too. (Example: When a small gift is given to the donor with the church name or logo on it like a bumper sticker, coffee mug). Or, provide a statement that goods or services (if any) that the church provided in return for the contribution consisted entirely of intangible religious benefits if that was the case.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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