[GUEST POST] Demystifying Peer-to-Peer Donation Receipts: 7 Fast Facts
Donation receipts aren’t just proof of your donors’ charitable contributions or a means to tax deductions, nor are they simply a legal necessity. Donation receipts are also an important means of communicating with your donors.
Though donation receipts are important for all of your fundraising campaigns, they’re especially important in peer-to-peer (P2P) fundraising. After all, your supporters will be reaching out to their individual networks, and their donors may be unfamiliar with your nonprofit.
Your job as a fundraiser is to initiate contact with these donors after they make a gift, and donation receipts are the perfect opportunity to do so.
By thoroughly understanding donation receipts and how you can use them, you’ll be able to take advantage of required receipts to further your nonprofit’s mission.
To help you understand donation receipts, we’re bringing you 7 fast facts about these very important documents. Here’s what we’ll discuss:
Information in this article has been taken from the IRS guidelines, which may update or change over time. Be sure to double check your donation receipt requirements.
Quick disclaimer: This article is researched and designed around U.S.-based donations and tax requirements. While there are universal takeaways about donor acknowledgements and donation receipts within this article, if you’re fundraising outside the U.S., it’s important to look up the laws, guidelines, and requirements for your specific location.
While it’s important to understand donation receipt basics, it’s also important to recognize that donation receipts are about more than taxes and numbers.
They’re an extension of your gratitude and the perfect way to wrap up a donor’s contribution to a fundraising campaign.
To learn more about effectively ending your peer-to-peer campaigns with the donor in mind, you can check out this resource: http://npengage.com/nonprofit-fundraising/smart-techniques-for-wrapping-up-your-peer-to-peer-fundraising-campaign/
Now, let’s get started with donation receipts!
#1: The IRS requires nonprofits to provide donation receipts.
Nonprofits are legally required to provide donation receipts under specific circumstances.
In fact, nonprofits can receive penalties of $10 per contribution if they fail to provide receipts (up to $5,000 for each campaign if they fail to give receipts).
This fact is perhaps the most basic when it comes to understanding donation receipts, but we’ll still discuss it in detail to clear up any potential confusion.
Donor receipts are necessary for:
- Single donations greater than $250.
- Single donations greater than $75 if the donor receives goods or services in exchange for their donation (please note: there are two main exceptions to this rule that will be discussed in the next fact).
- Donors who ask for a donation receipt.
Where to learn more:
To understand donation receipts, from the very basics to the more complex legal intricacies, check out this comprehensive guide: https://www.qgiv.com/blog/donation-receipts/.
#2 Exceptions to receipt rules apply under specific circumstances.
For single donations greater than $75, receipts must be provided if goods and services were exchanged for the donation.
This fact is especially important to keep in mind when it comes to P2P fundraising campaigns that offer products in tandem with their events.
As mentioned above, there are two common exceptions to this rule.
These exceptions occur when:
- The goods and services provided are tokens.
- Goods and services are given in exchange for an annual membership fee under $75, and these goods and services consist of rights or privileges that occur annually.
While it’s important to keep both of these in mind, we’ll specifically focus on the first exception, as it’s the most relevant to P2P fundraising.
Tokens are insubstantial goods and services given in the context of a fundraising campaign.
When tokens are provided, the nonprofit must inform the donor of the amount of the contribution that is deductible, and one of the following must occur:
- The benefits that the donor receives cannot have a fair market value that exceeds 2% of the donor’s payment. The maximum value of the benefits that the donor receives cannot exceed $106, regardless of the donor’s payment.
- The donor’s payment is at least $53. The items that the donor receives bear the nonprofit’s name or logo and are within the limit of $10.60. The IRS defines these items as “low-cost articles.” Examples of “low cost articles” include calendars or mugs with your nonprofit’s logo.
To sum up, you do not need to give donation receipts when you provide items to donors that are cheap relative to the donation or that are “low cost articles,” as long as you inform the donor about how much of their donation is deductible.
Where to learn more:
Keeping this information about goods and services exceptions in mind, you’ll want to carefully consider what products you use as promotional items during your fundraising campaigns. Learn more about fundraising product ideas to prepare for token and membership exceptions by clicking here: http://blog.booster.com/product-fundraising-ideas/
#3 Receipt requirements are clear.
The IRS has clear guidelines for what must go on a donation receipt, whether you’re hosting a P2P campaign or any other type of fundraiser.
Donation receipts must include:
- The donor’s name.
- The organization’s name.
- The organization’s federal tax ID number and a statement of 501(c)(3) registration.
- The date of the donation.
- The amount of donated money or a description of the donated items (do not provide the value of the donated items. The donor is responsible for assigning a cash value to these items).
- A statement saying whether goods or services were exchanged for the donation. If goods and services were exchanged (for donations of $75 or more), the nonprofit must provide a good-faith estimate of the value of those goods and services.
- The name and signature of an authorized representative from your nonprofit.
- A disclosure (varies from state to state).
Where to learn more:
All of the information on your donation receipt is important for keeping your nonprofit in line with legal requirements, but a lot of this information will already be integrated into your other nonprofit materials.
Learn more about information that you’ll need to include across your communications, specifically about fundraising letters, by clicking here: https://www.qgiv.com/blog/fundraising-letter-templates/.
#4 Donation receipts can be combined with donor thank you letters.
Donation receipts are more than tax deductions or documentation of a donor’s charitable act. They are also a means of communicating with donors after they’ve given to your nonprofit.
Since nonprofits are legally required to provide donation receipts, why not make the most of your situation by combining your receipt with a personalized thank you?
As long as your donation receipts meet the legal requirements listed in the above section, you can customize them with your donors in mind. There are several advantages to combining receipts with thank you letters:
- Personalizes donation experience. Using your receipts to thank your donors gives your nonprofit the opportunity to emphasize how much their contribution means to your organization. Further, thanking donors while illustrating how their charitable gift provides tangible benefits (i.e. tax deductions) can help cultivate a positive relationship with giving.
- Consolidates two mailings into one. Sending one email instead of two is more efficient, and your donors will appreciate your efforts to keep their inbox from clogging. Further, you’ll cut the cost of postage that you’d incur by mailing thank you letters separately from receipts.
Remember: for some of your P2P donors, your donation receipt will be their first encounter with your nonprofit.
Take the chance to send them a targeted communication that addresses them by name, thanks them directly for their support, and incentivizes further action.
Where to learn more:
Combining your donation receipts with thank you letters can help you consolidate your interactions with donors. You can start cultivating stronger relationships with your donors if you incorporate their donation behavior into your donor profiles, which you can learn more about by clicking here: http://www.donorsearch.net/prospect-profile-templates/.
#5 Donation receipts are more than a means to tax deduction.
Though deductions are important, there are other benefits that your nonprofit should consider when developing a receipt strategy.
For example, donation receipts also allow donors to:
- Confirm their donation. A receipt is a tangible way for a donor to see that their contribution has gone through to your nonprofit. Customizing receipts for specific donation amounts or items can further personalize the donation experience for your donors.
- Remember your nonprofit. A receipt helps remind donors of their contribution, but it can also help keep your nonprofit at the front of their minds. Be sure that your nonprofit’s name and/or logo are displayed prominently.
- Learn about more opportunities for engagement. A donation receipt that includes a link to your nonprofit’s mission page or a specific call to action can show how your donors can get involved with your organization. After all, new donors acquired through P2P fundraising could use the information and the inspiration!
Where to learn more:
A donation receipt is the perfect real estate to call your donors to action and keep the philanthropic spark alive during a fundraising campaign. Read up on keeping supporters energized during your P2P campaign here: http://npengage.com/nonprofit-fundraising/keep-the-spark-alive-in-your-peer-to-peer-fundraising-campaign/
#6 Nonprofits can use donation receipts to track donor data.
Nonprofits can make the most out of the donation receipt process by using it to gain valuable insights into individual donor behavior.
Additionally, since P2P fundraising makes the most of your supporters’ networks, you can note any interesting trends that may help you identify high-level donors.
Donation receipts can be used to:
- Keep track of individual donors’ donation histories. Integrating receipts into your donor data tracking can streamline your process of building donor profiles. Receipts show past giving, which can help you understand, segment, and approach your donors.
- Maintain accurate financial records. Donation receipts aren’t just physical copies to remind donors of their donations; they’re also useful for your own records. Keeping receipts on file can keep your nonprofit organized in the event that information needs to be retrieved.
Where to learn more:
Now that you know that there’s more value to donation receipts than staying out of legal trouble, consider how you can integrate the donation receipt process into your current donor data tracking and fundraising campaign metrics. For more information about integrating data into your campaign, check out this resource: http://npengage.com/nonprofit-fundraising/top-tips-for-planning-a-successful-peer-to-peer-fundraising-campaign/
#7: Receipt paper trails can be cut with email.
Donation receipts can be mailed through postage or sent electronically. Consider both options based upon the scope of a particular donation and donor preferences.
Just remember that all donation receipts must be sent out by January 31st of the year following the donation.
These facts can help you better understand how donation receipts can be integrated with email:
- Online donation pages can automatically email receipts. Online fundraising software may include an automatic receipt feature, which will help ensure that your donation receipts are delivered promptly.
- The email platform can be integrated with P2P fundraising. You may be able to integrate your receipt process into your P2P campaign even further by customizing the receipts to match the individual fundraiser’s campaign (i.e. “Thank you for giving to Anne’s Fundraiser for Child Hunger”).
- Quick correspondence is usually best. An immediate receipt confirms your supporter’s donation, which reassures them that their charitable contribution has been received. Do not sacrifice customization for convenience; instead, strike a balance between personalizing receipts and sending them quickly.
Where to learn more:
Emails are an effective means of communicating with your donors, and a communications strategy will help you maximize every email that you send. To learn more about planning a communication strategy for your P2P campaigns, click here: http://npengage.com/nonprofit-fundraising/3-2-1-how-to-successfully-launch-a-peer-to-peer-fundraising-campaign/
With these fast facts and additional resources, you should be ready to tackle donation receipts in your own nonprofit.
Whether you’ll be making slight adjustments to your process or wholly integrating donation receipts into your P2P fundraising, you have the know-how to use donation receipts to your nonprofit’s full advantage — all while staying legally sound.
Kimberly Funk is the Channel Marketing Manager at Qgiv, a company providing online fundraising solutions that empower nonprofits to thrive and grow. Kimberly is a seasoned Marketing & Sales professional, having worked extensively in various industries such as financial, entertainment, solar, employment and franchising and most importantly…nonprofit. In her free time, she is on the tennis court, Pilates studio, or being dog mom to her rescue puppies.