It’s Year End! Tips for Donor Acknowledgement Letters

The month of December is always busy for fundraising.

According to a recent benchmarking report, the percent of revenue raised per month is 13% in November and 26% in December — that’s a whopping 39% at year end. In addition, it states that “Nonprofits received 5% of all 2022 revenue on the last day of the year.”

That’s a massive volume of appeal messages sent, and contributions received, with many of them happening on Dec. 31.

Given the flurry of activity, we wanted to remind our colleagues of what the IRS requires for donor acknowledgement letters and how to handle all those gifts that may straddle 2023 and 2024.

First, it’s important to remember that a donor acknowledgement letter should be compelling and written in a meaningful and timely way that expresses gratitude and the impact of the gift.

Donors want to feel connected to the mission. If your letters arrive weeks (or months) after a gift is given, and/or if they are written in a perfunctory manner, you’ve lost the opportunity to make a connection.

Second, the IRS requires very specific information in terms of an acknowledgement letter. According to IRS Publication 1771, Charitable Contributions — Substantiation and Disclosure Requirements are as follows:

A donor can deduct a contribution of $250 or more only if the donor has written acknowledgement from the charitable organization. The donor must get the acknowledgement earlier than the date of when the donor files their tax return.

The written acknowledgement must include:

  • Name of the organization,
  • Amount of cash contribution,
  • Description (but not value) of non-cash contribution,
  • Statement that no goods or services were provided by the organization, if that is the case,
  • Description and good faith estimate of the value of goods or services, if any, that the organization provided in return for the contribution, and
    • Disclosure must be provided on a single payment more than $75.
    • Token exception for less than $106 or for low-cost articles of $10.60 or less.
  • Statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible religious benefits, if that was the case.

The donor has an obligation to maintain written records, either a bank record such as a cancelled check or a letter from the charity, which states the name of the charity, the date of the contribution, and the amount of the contribution.

“Thank you for your cash contribution of $300 that (organization’s name) received on Dec. 1, 2023. No goods or services were provided in exchange for your contribution.”

“Thank you for your cash contribution of $350 that (organization’s name) received on May 6, 2023. In exchange for your contribution, we gave you a cookbook with an estimated fair market value of $60.”

Third, what happens when a gift arrives after Dec. 31? IRS Publication 526 When to Deduct states when a donor mails the check, not when the organization receives it.

During the last week of the year and first week of the new year, please remember to keep all envelopes associated with mailed checks for your substantiation obligation. If the envelope is postmarked Dec. 31 or earlier, it is a 2023 gift.

If the check is written as Dec. 31, 2023, and the postmark is Jan. 2, 2024, the first business day of the year, call the donor and ask their intent. It could be that they put the envelope in a mailbox on Dec. 31, but they missed the post office pick-up time. The IRS rule is “a check you mail to a charity is considered delivered on the date you mail it.” It is not the date the organization deposits it.

It does not matter if your office is closed during the holidays. The delay in receiving mail and depositing checks should not make an impact on your donor’s taxes. The key is donor intent.

If the check is written as Dec. 31, 2023, and the postmark is after Jan. 2, 2024, I suggest that the gift be considered a 2024 contribution. During the first full week of January, you can word your tax acknowledgement letter to say, “While the date of the check was Dec. 31, 2023, the postmark on the envelope was Jan. 4, 2024.” That puts the ball in the donor’s court as to what tax year they claim the donation.

Best wishes on your year-end fundraising efforts. We hope this guide helps you honor your donor’s commitment to your mission.

— Kerri Mollard, Founder & CEO, Mollard Consulting, LLC

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