After the fundraising marathon of November and December, thinking about another development strategy in January may seem like going overboard. Or exhausted fundraisers may not be ready to add another large project to their list.
However, a built-in requirement for every nonprofit in the United States provides an inspiring place to add extra stewardship at a key time of year. We’re talking about a written acknowledgement for gifts, also called a “tax statement letter” and an “acknowledgement letter.”
What is a Tax Statement Letter?
Besides “thank-yous” being a cornerstone practice of philanthropy, the IRS requires nonprofits to send written acknowledgments to donors who give $250 or more.
It is best to send a written acknowledgment to your donors as soon as possible; they must arrive before January 31 to allow enough time for donors to claim their charitable deductions while paying taxes for the appropriate year.
These acknowledgment letters are straightforward, most likely sent via snail mail and must contain the following, per the IRS:
- name of the organization;
- amount of cash contribution;
- description (but not value) of non-cash contribution;
- statement that no tangible 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 organization provided in return for the contribution
Many nonprofits use their standard written acknowledgment/thank you letter, sent soon after the donation throughout the year, as the fulfillment of this IRS requirement. But savvy fundraisers can use a tax statement letter as a terrific opportunity for stewardship at a prime time.
Why Send a Tax Statement Letter?
Many donors expect these tax statement letters and dependably open them to help prepare to file their taxes. This means you have a captive audience for a piece of mail—and your audience is most likely more focused than normal on that piece of mail.
This acknowledgement letter will most likely be saved, brought to tax appointments, and referred to again and again. Unlike other brochures donors may pick up and quickly discard, these letters are designed to be kept around.
While most nonprofits already send written acknowledgements with all of the IRS requirements throughout the year as donations roll in, consider sending another comprehensive acknowledgement mailing in January for all donors (or just those who gave $250+ for starters). This way your donors will have a convenient reference for their donations, and you have another excellent opportunity for stewardship with an engaged audience right after the giving season.
Opportunities in a Tax Statement Letter
As mentioned above, the tax statement letter must be straightforward and include specific components as outlined by the federal government. However, there are ways to improve this acknowledgement letter and what is enclosed with the letter.
Body of the Letter
There are many wonderful resources to help nonprofits write a great donor thank-you letter. Be sure to include sincere appreciation for their gift and provide an example of what their work can do.
Keep the body of the letter shorter than usual to allow for enough room for the footnote of the acknowledgement letter, which is where the bulk of the tax information (written acknowledgement) will go.
Footnote of the Letter
After the signature of your letter, add a line or other visual break so donors can see the clear distinction between your heartfelt thanks and the legalese required for their taxes.
Include these details for a donor’s easy reference:
- Name of the donor
- Full, legal name of the nonprofit organization
- Tax-Exempt Status and EIN: A statement declaring your organization’s 501(c)(3) tax-exempt status, including your EIN (Employer Identification Number)
- Date: The date that the gift was received by your nonprofit. Every gift should also have its own letter—if the donor made two separate contributions to your nonprofit, you should send a separate acknowledgement letter for each donation, in addition to the year-end, comprehensive acknowledgement.
Consider verbiage like this:
Thank you for your generous contribution of (amount of donation) on (date of donation). No goods or services were provided in exchange for this contribution. (Nonprofit organization) is an exempt organization as described in Section 501(c)(3) of the Internal Revenue Code with an EIN # of (EIN #).
Enclosures with the Letter
Consider developing a memorable, colorful, and bold infographic or other marketing piece that can be consumed at a quick glance.
What kind of content should you choose for this enclosure? Consider topics that communicate something newsworthy and rewarding to a donor, quickly:
- Updates on a fundraising goal (Giving Tuesday, year-end campaigns)
- Photos of progress toward a project that donors have recently funded
- Skimmable, short sentences and bold headlines
- Colorful and graphic layouts
- Flier, postcard, bookmark—something easy to slip into an envelope
- Upbeat and solutions-oriented (this is NOT a fundraising ask!)
What to avoid for this enclosure? Anything that feels like work for the donor. Resist the urge to ask for donations. Remember, this is strictly a stewardship tool (especially after an intense period of giving like year-end) and a written acknowledgement.
- Text-heavy brochures or newsletters
- Introduction of a new initiative or concept
- Request for donations
- Emotionally draining topics or photos
By capturing your donor’s attention with a feel-good solution or success story offered by your nonprofit, you can maintain the momentum earned during the height of your year-end giving campaigns.
It is vital to stay in touch with donors and offer them high-value marketing materials that are memorable and compel donors to share the information with others. Tax statement acknowledgement letters provide ample opportunities to continue building meaningful relationships with donors.