Tax Information for Online
(& All) Donations
Good overview: www.independentsector.org/programs/gr/Tax_Time_Tips.html
From the Independent Sector brief:
Q: I am a little not-for-profit group. Do I have to provide receipts for donations?
Answer #1: If you are not a 501(c)(3) organizations, then the answer is "no." And people who donate to your organization can not receive tax deductions from their gifts. However, It is smart to provide a receipt and a thank you note for ALL donations and to keep the donor in your records for future requests.
Answer #2: If you are a 501(c)(3) the recordkeeping requirements vary according to the amount and type of gift. Here are the 3 types:
(1) For contributions of $75 or greater if your nonprofit provided a return benefit, that is an item or a service/event/experience that cost more than $8.50 . In this case, the receipt statement must include a good faith estimate of the value of the return benefit and it must advise the donor that only the amount of the gift in excess of the benefit is deductible. (ex. a donation for a party ticket was $80, the party cost $20 per person to create, the receipt needs to say a "$80 donation, $20 benefit/item and $60 was a tax-deductible donation." However, if the gift was something $8.50 or cheaper that does not count as a "return benefit" and thus the entire donation is tax-deductible. Also, if everything for the party was donated, then the entire cost of the ticket is tax-deductible (the idea is that the IRS wants to register the financial impact of the transaction on the nonprofit; they don't want groups holding fundraisers that cost $1,000 to throw, but only $500 is raised to help people).
(2) For cash/check/credit card
contributions less than $250, the gift does not have to be acknowledged,
the donor's canceled check, credit card or cash receipt is all they need
to claim a deduction on their taxes.
(3) For contributions
of $250 or more, you must provide a
written acknowledgment, either on paper or electronically (such as
by email) which must contain:
(a) the name of your organization,
(b) date,
(c) amount
of a cash contribution or description of a non-cash contribution, and
(d)
a description of benefits (if any) received in return with an estimation
of their value or if none, a statement to that effect.
How do I determine what is deductible?
The payment is
a deductible charitable contribution minus the fair market value of the
item or benefit given. If you
received $100 to a museum and received a book in return that sells regularly
for $25, you can only claim $75 as a charitable deduction. IRS
Publication 526, Charitable Contributions (PDF), provides further explanation
and examples of the portion of a contribution that is deductible.
IRS source:
http://www.irs.gov/pub/irs-pdf/p526.pdf -
page 3 on assessing the fair market value
What if I have a Fiscal Sponsor?
If you raised it, even if it is in a check made out to fiscal sponsor who
then turns it over to you, it still counts as income towards your group,
not the fiscal sponsor. Read
more.
Example of language to incorporate into acknowledgement email:
http://www.ncnonprofits.org/faq/donorsublang.pdf
How much money does my not-for-profit group have to
make before it has to file taxes?
You have to file a 1023 tax form if you have annual gross receipts
greater than $5000. You have to file a 990 if you have annual revenues of
$25,000. Pending legislation would make it mandatory for all nonprofits to
file a 990 annually regardless of revenue. Check out more info at:
http://web2.acbl.org/documentLibrary/units/IRStaxExempt.pdf is
a good reference sheet.
http://www.irs.gov/pub/irs-pdf/p4220.pdf is
the IRS document on becoming a 501(c)3.
I am a not-for-profit group. How can I get free legal help to become a 501(c)3?
Call or email the Lawyer's Alliance for New
York. Be persistant, they are
busy.