Once an individual donates to a church, even a single contribution, it is the responsibility of the church at the end of the year to prepare an annual statement showing what the donor contributed during the past year.
Usually, quarterly statements are unnecessary, unless they are requested by the donor. To receive this written acknowledgment, the individual must be known to have contributed any monetary offerings by the treasurer of the church. Nowadays, some church members may opt to have their annual giving statements in electronic form. In that case, the church needs their e-mail address to get this tax-important information to them.
Disclaimer: The following information found in this article is designed only to be educational and in no way be considered as professional tax advice or legal advice.
Annual Contribution Statement for Churches — A Church Letter
The annual contribution statement for churches is an important tax document for you as a church donor to understand. Also, if you ever have the privilege of helping or even being a church leader who handles your church’s finances, you also need to know what should be included in this very important document. Every church needs to keep accurate financial records, both for the benefit of the congregation and for the benefit of the government. Congregants who contribute money during a church service are usually not given donation receipts at the end of a service, so it is up to the church’s bookkeeper to keep accurate records of these tax-deductible gifts given throughout the year.
At the beginning of a new year, a church letter listing all contributions, which is a written acknowledgement that serves as a receipt by the church, should be given to each monetary-contributing member as proof of their tithes and offerings during the past year. A church member should not have to rely on their bank record to prove what they gave to their church during the previous year. These annual statements are legal tax documents that provide proof of their tax-deductible donations and are necessary for the individual’s U.S. federal income tax returns if they are filing a long form.
Each donor should be aware of the way the church handles donations receipts. Generally, the annual contribution statement for churches serves as a written acknowledgement of what was given by the congregant to the church during the last year. In order for a church member to receive a receipt for income tax purposes, they must let the church know what they offered. Simply placing cash into the offering plate will not escape the notice of God, but it will not generate a receipt from the church leaders.
To receive a receipt, an individual must place their cash or check into an envelope marked with their name, or if the church accepts credit card donations, use their debit card, which links their contact information to their donation. This annual contribution statement is given to the donors either in a hard copy format, or for those who prefer paperless, they should give the religious organization their e-mail address to receive it via e-mail.
Whether or not a church has a 501c3 designation, it is a non-taxable entity. Therefore, all donations received by this type of charitable organization are automatically tax deductible, but the burden of proof is on the congregant who has donated to the church during the past year.
Annual Contribution Statement for Churches — Cover Letter
Although unnecessary, and generally not included by the church’s bookkeeper, it is a good idea to also have a cover letter. The annual giving statements are specific information to what the donor contributed, but the cover letter can be general. A church, like any other nonprofit organization, depends on charitable contributions to operate. Therefore, an annual contribution statement by the receiving church is the perfect time to thank those who contributed during the past year.
This “thank you,” by way of a cover letter, goes a long way in making those who contributed during the year feel appreciated, and encourages them to continue giving during the next year. In the cover letter, the church should explain how it used the monetary gifts given to the church, such as meeting the financial needs of the church itself, in helping the church community, and by giving to any other ministries/missionaries the church supports financially. It should also share its vision of what the church plans on doing in the coming year.
Below is a list of rules concerning charitable giving to a church. Adhering to these rules goes a long way in establishing trust between church leadership and congregant as the church obeys both God and the United States government.
Annual Contribution Statement for Churches – Rule #1
Need to be Issued on or Before January 31
It is expected that all necessary tax papers for the past year be sent out to taxpayers on or before January 31, and year-end statements from the church are no different. Church members need their contribution statement for the previous year by way of either a paper copy or in electronic form in order to file their tax returns, if they intend to use their contributions as a tax deduction. The date range and each contribution by the recipient is recorded in this letter.
Annual Contribution Statement for Churches Rule #2
Timing of Credit Card Donations
Many churches accept credit card donations. This is a convenient way for religious organizations to process their charitable contributions. For those church members who want to close the year with a huge donation to use as a tax write-off for the following year, and use their credit card to do so, they need to be aware that if they make their contribution on December 31, the church must process their payment that day, which is the end of the year.
According to the IRS Publication Number 526 (Page 13, Under When to Deduct — Credit Card), if the credit card donation was not processed until on or after January 1 of the new year, the donor must wait until next year before they can use that particular contribution as a tax write-off. If this is important to the people in your congretation, make sure you don’t wait until the very end of each year to give your donation.
Annual Contribution Statement for Churches Rule #3
Quid Pro Quo Rule
This rule applies to a church when the donor receives something from the church in return for some of their donation. If a church sells a Bible to an individual for $30 and the buyer gives the church $50, the donor would be credited with a tax-deduction donation of only $20 since the first $30 would be credited to the purchase of the Bible.
The church also is required to give a written statement of the value of the goods or services provided in exchange for the contribution.
The Annual Contribution Statement for Churches Rule #4
The Noncash Rule
When an individual donates an item to the church, the church is prohibited by the Internal Revenue Service (see section 170(f)(8)(B)i) from estimating the cash value of the item and then giving the donor a receipt for that amount since there was no cash given. For example, if an individual donates a sound system to a church, which has a value of $1,000, the church cannot issue a receipt of $1,000. Rather, the church should give the donor a written acknowledgement of the gift.
Annual Contribution Statement for Churches Rule #5
The $75 Rule
In order for a donor to receive a receipt from the church to use as a tax deduction who gives a quid pro quo contribution to the church that exceeds $75, the church needs to give the donor a separate written receipt that states how much was donated. This receipt should include a “good faith estimate” of the value of goods and services received from the church in return for their contribution. The donor is then obligated to decrease their total donation amount by the value of goods or services given by the church.
Annual Contribution Statement for Churches Rule #6
The $250 Rule
This U.S. Internal Revenue Service regulation states that any donation of $250 or more given to a church will be considered differently if the individual who is contributing receives something from the church in return for their donation. In order to use this donation as a tax write-off, the donor must obtain from the church a separate, written document stating what and how much was given and that “other than those listed, no goods or services were provided except for intangible religious benefits.”
However, if the individual received nothing in return and they just gave $250 or more at a single time, their contributions can be itemized like any other donation and included in the annual contribution statement with any other donations. Again is it necessary to include the phrase something to the effect “unless otherwise specified, no goods or services were provided except for intangible religious benefits.”
The Annual Contribution Statement for Churches Rule #7
The $500 rule
Often times, a church may receive noncash donations such as office equipment, musical instruments, computers, sound systems, and other related, expensive items. If the donor wishes to write off the donation that consists of an item(s) other than cash, the individual must file an IRS Form 8283.
In doing so, the donor can claim a tax donation for the value of the item(s) donated and the church also acknowledges receiving the gift.
The Annual Contribution Statement for Churches Rule #8
Contributions of Motor Vehicles, Boats, and Airplanes
An individual who decides to donate a motor vehicle to a church, such as a bus, RV, car, van, boat, airplane, or similar motorized item that is valued above $500, must also, in order to use their donation as a tax write-off, file a separate form 1098-C for each motor vehicle. Like the $500 rule, filing this form allows the donor to claim their gift as a tax donation while the church acknowledges the gift.
If you found this article helpful, you may like to know about Bible verses about why we go to church on Sunday. Check it out!
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