Recurring gifts are a reliable source of revenue for nonprofits. Although accepting them may be as simple as enabling monthly, quarterly, or even annual donations on your donation page, there’s additional work nonprofits must do to ensure that your program is strong.This includes properly issuing donation receipts.

This process can be confusing for nonprofit professionals. For instance, if a donor gives $50 every month, do you send 12 separate receipts or just one at the end of the year? Getting your donation tax receipts right is critical for regulatory compliance and for retaining donors.

In this guide, we’ll take a look at a few top tips for managing donation tax receipts for your nonprofit’s recurring gifts.

1. Master the IRS Substantiation Requirements

Before all else, ensure your receipts meet legal standards. The Internal Revenue Service (IRS) requires a written acknowledgement for any single contribution of $250 or more, but it’s a best practice to issue a receipt for every donation, no matter the size. Plus, while recurring gifts may be smaller than this threshold, the total of all a donor’s gifts may exceed it.

To comply with IRS regulations, every donation tax receipt should include:

• Your organization’s name and employer identification number (EIN)
• The amount of the cash contribution or description of a non-cash contribution
• The date that the nonprofit received the funds
• A statement outlining one of the following scenarios:
  • That your organization didn’t provide goods or services in return for the donation
  • A description and good-faith estimate of the value of any goods or services your organization provided in return for the contribution
  • That the goods or services provided in return by your organization consisted of only intangible religious benefits

Most recurring gifts are cash contributions made without receiving anything in return from the nonprofit.

Additionally, fundraising best practices and legal guidelines are constantly changing in response to shifting economic conditions and government regulations. Stay up-to-date with IRS rules and regulations, so you know when and how to make necessary changes to your donation templates.

2. Offer Consolidated Annual Receipts

One of the most common questions nonprofits have about tax receipts for recurring gifts is, “How often should I send them?” Many organizations worry that sending a receipt every time a recurring gift is made annoys donors, as it may clutter their inboxes and make tax filing more difficult. For instance, a donor who gives monthly would receive 12 receipts over the course of the year, which they would have to track down during tax season.

However, if donors’ gifts go unacknowledged by your nonprofit, it may cause mistrust within your recurring donor base. Plus, you’ll miss out on the stewardship opportunities those receipts represent.

To resolve both of these issues, send donors a consolidated annual donation receipt as well as a transaction acknowledgement and thank-you message after every gift. The annual receipt will summarize all gifts made during the tax year, making it easy for donors to reference during tax season. And, you’ll be able to continue showing your gratitude periodically throughout the year with your thank-you emails.

3. Automate the Process With Your CRM

Manually generating receipts is a recipe for errors and burnout. Your donor management system should handle the heavy lifting. Constituent relationship management (CRM) platforms like Charityproud allow you to issue receipts automatically, ensuring that they are prompt and accurate.

When configured well, receipt automation ensures that:

• Donation tax receipts are also sent in a timely manner after a recurring gift.
• Donor data is pulled directly from your records, minimizing typos or errors.
• You can set triggers for immediate receipts or end-of-year summaries.
• You free up staff time for other important tasks.

Plus, tools like Charityproud allow you to make recurring gifts more appealing through features like autopay. Donors can “set and forget” their donations, eliminating the extra steps of going to your website and donating every month or quarter. Your CRM should work seamlessly with other tools to ensure a holistic view of donor data. For example, if your nonprofit operates a thrift store, your CRM should pull in data from your point of sale (POS) system so you can see in your CRM if a donor has interacted with your store.

4. Personalize Your Acknowledgments

Every donation tax receipt is an opportunity for donor stewardship, as it’s a natural touchpoint that your community expects from your nonprofit. Take advantage of this organic opportunity by personalizing your acknowledgements and inviting your donors to stay connected with your mission.

While you need to include certain information in your donation receipt for regulatory and compliance reasons, that doesn’t mean that your messaging has to be dry and transactional. For instance, while the bottom half of your email might be the donation receipt, the top half can be a heartfelt letter of gratitude.

Here are a few tips for ways you can personalize your messaging:

• Address the donor directly by their first name to create an immediate personal connection.
• Briefly mention what their support has helped your nonprofit accomplish this year.
• Write the nonlegal portions of the message in a warm, conversational tone rather than using stiff, corporate language.
• Acknowledge the duration of the donor’s support to show you value their long-term loyalty.
• Invite the donor to engage with your mission in another way, such as volunteering at a thrift store your organization operates.
• Sign off the email with a real person's name and title rather than a generic organization name.

It’s also a good idea to periodically check in with donors to ensure you still have accurate details for them. Since recurring donors tend to remain loyal to nonprofits over the long term, their contact information can become outdated, which presents a significant issue during tax season.

Throughout the year, use your newsletter or monthly check-ins to remind donors to update their contact information and billing details. Additionally, if a recurring donor only provided their email address but not their phone number or vice versa, you may append their contact data to create a more complete donor profile that supports your donor pipelines. Charityproud makes it easy by providing checkboxes for you to decide which pieces of contact information you can collect on external Charityproud pages.

Your recurring donors have committed to supporting your nonprofit long-term. It’s only right that you should supply them with compliant donation tax receipts that also express your gratitude for their support. Take the time to review your current receipting process. A few tweaks and using the  automation tools Charityproud has can save your team hours of work and leave your most loyal supporters feeling more appreciated than ever.