Every holiday season, individuals are encouraged to give to their favorite charities by year-end. National Day of Giving serves as another nudge, along with the knowledge of tax benefits to charitable giving. Now that 2024 is here, tax-exempt organizations may need to brush up on next steps after receiving generous contributions. Below are a few charitable receipt reminders for these organizations.
Donor Acknowledgment Letters
Donor acknowledgment letters are critical for your donors, as they allow them to take deductions on their tax returns. It is important to issue these letters in a timely fashion, or at least before the donor files the tax return on which they are taking their deduction. Ensure these are completed for your organization’s 2023 calendar-year contributions received that were greater than $250. In addition, written acknowledgment is required if the donor received goods or services in exchange for a donation of $75 or more. To note, the acknowledgment must contain the following:
- Name of your organization;
- Date of contribution;
- Amount of cash contributions received;
- Description of non-cash contributions (if applicable); and
- A statement that no goods or services were provided by the organization in return for the contribution, or a description of the value of goods or services that an organization provided in return for the contribution.
Form 8283
This form is used to report non-cash charitable contributions greater than $500. Donors typically need this form for publicly traded securities since it can be a smart tax strategy to donate appreciated stock to your organization. The donor must file this form with their tax return in order to take the deduction, and it is the donor’s responsibility to complete the form. However, tax-exempt organizations can help strengthen their relationships with donors by kindly reminding them of their requirements. For noncash donations totaling more than $5,000 and requiring a qualified appraisal, the tax-exempt organization must sign the form before the donor can attach it to their return claiming the deduction.
Form 8282
A tax-exempt organization is required to complete this form when it disposes of certain donated charitable property within three years after the donor contributed that property. This form is due within 125 days after the date the property is disposed of. The tax-exempt organization also is required to give a completed copy of the form to the original donor of the property. Depending on the amount the organization sold the item for, this could cause the donor to recapture part of their charitable contribution deduction as income. Some exceptions to this include items that were consumed or distributed for charitable purposes. Also, this is typically not required for selling donated publicly traded stock.
Cryptocurrency
An emerging donor trend is to give in cryptocurrency instead of cash to tax-exempt organizations. Similar to stock, the donor can claim a deduction for the fair market value of appreciated cryptocurrency if held for more than one year to avoid paying tax on the capital gains. Because cryptocurrency is treated as property for tax purposes, if a donor gives in cryptocurrency, a Form 8283 will be required if the donation is over $500, and a qualified appraisal is required if the amount exceeds $5,000. If your organization’s policy is to sell cryptocurrency as soon as it is received, then a Form 8282 would be required. Tax-exempt organizations that are not set up to receive cryptocurrency may miss opportunities with donors. Organizations interested in accepting cryptocurrency donations can watch this webinar from Forvis Mazars which highlights companies that can help streamline the process and mitigate risk.
Gift Acceptance Policy
A gift acceptance policy is beneficial for tax-exempt organizations since it clarifies the types of contributions that companies will and will not accept. The policy framework can provide clear processes in accepting donations and allows teams to handle donations in a timely fashion.
For questions related to accepting contributions, policies, or getting your organization ready for crypto donations, please reach out to a professional at Forvis Mazars.