Many donors scramble to get donations in before the personal tax year ends at midnight on December 31st. If your organization received any contributions of $250 or more from any person or entity, they will need a letter from you to prove their deduction to the IRS. While there is no formal due date for the letter, a general rule of thumb is to provide the letter no later than January 31st.
Here’s a reminder about your receipt of and accounting for non-cash donations:
– Provide the donor with a receipt that includes your name, address, date and location where the gift is received.
– The donor is responsible for a description of the item, its fair market value and how the value was determined. If there is a question of value, then the donor should be advised to keep a photo of the item to substantiate the condition of the donated item.
– Donations of stock are valued at the date at which the stock changes hands from the donor to the nonprofit organization.
– If a non-cash donation exceeds $500, the donor must complete IRS Form 8283.
– Items that exceed a value of $5,000 must have an appraisal by a qualified appraiser.
Your donors are responsible for the accounting of itemized deductions on their personal returns. Yet without your donor acknowledgment letter, the IRS can disallow the deduction. You can respond to general questions regarding tax deductions while referring them to their tax preparer.
Happy New Year!