Donor Management - Simplified

Although issuing contribution receipts or statements is not required by law, it is a decidedly essential practice if your church would like to keep receiving donations. The IRS has strict rules for individuals claiming donations as deductions on their tax returns. Let’s take a quick look at these rules and discuss how to best serve our donors so that they can take advantage of those important tax deductions.

Which types of contributions require receipt?

An individual must obtain a written acknowledgement for any individual contribution over $250. For any contribution under $250, a bank record or canceled check is sufficient. However, it is good practice to acknowledge all receipts that are known and recorded. A written receipt should also be issued for all non-cash donations. But avoid including a value on that receipt.

Which types of contributions are not eligible for tax deduction?

If any goods or services (other than intangible religious benefits) are received or expected as a result of a specific contribution, then that amount is not eligible for deduction. This includes dinner, event entry, or even raffle drawings.

Also, the donor must relinquish control of the donation. They can't tell you exactly what to use it for. For example, they can give to the Angels Ministry but can't direct the funds be used for a specific person.

What must be included on the receipt?

• Name of church

• Name of donor

• Date of contribution

• Detailed description of property donated

• Amount of contribution (if cash only)

A statement such as “no goods or services were provided in exchange for this donation”

If goods or services are provided, then include the value of those services.

When and how should receipts be issued?

Receipts can be offered gift-by-gift, monthly, quarterly, or annually. It’s up to the church. There is no deadline for sending receipts to your donors. But, keep in mind, those donors need them to file annual taxes. Most churches issue receipts no later than January 31st for the previous year.

Receipts and/or statements can be mailed as written letter or electronically in email.

How should you manage donors and contributions?

Traditionally, churches manage donations and people with handwritten log books or electronic spreadsheets. But today, there are dozens of software and cloud-based applications that make donor management a breeze. They are affordable and offer many more benefits, such as:

• Online giving

• Automatic receipts

• Mass communication

• Giving reminders

• Volunteer scheduling

• Child check in/out

We strongly recommend incorporating one of these systems into your church ASAP.