How to Save Time on End-of-Year Tax Letters to Donors

The year-end appeal has wrapped up, staff have returned following their holiday time with family, and now the calls and emails begin rolling in from donors who want their end-of-year tax letters. It is important to donors to track all of their charitable contributions which may be tax deductible.

January can be a dreaded time of year for database administrators tasked with creating letters to donors for tax purposes.

While it was once necessary to do manual calculations and customize every donor letter, today we have the magic of automation. While canned tools from Blackbaud Raiser’s Edge can help meet the legal requirements for reporting to donors, automation can help customize letters and track data in the database.

Fundraising automation from AutomateGenius can save staff time and improve communication with donors. From tax statements to gift digests to database clean-up, fundraising automation can help improve the efficiency and effectiveness of any nonprofit fundraising office.

Charitable IRS Requirements

The IRS (Internal Revenue Service) requires that a tax receipt be sent for all cash donations of $250 or more. This letter or receipt must be sent by January 31 for the prior tax year.

This tax receipt must include:

Your organization name
The amount of cash contribution of $250 or more, or a description, but not cash value, of a non-cash item
Statement that no goods or services were given in exchange for the donation, if that is the case
Or a description and good faith estimate of the value of goods or services that were provided by the organization in return for the contribution

A full description of the IRS requirements can be found in Publication 1771 (Rev. 11-2023).

While a tax receipt is required, it is a missed opportunity if your nonprofit organization doesn’t take the time to send a personalized letter of gratitude to the donor. Think of the end-of-year tax letter to donors as one more opportunity to strengthen the donor’s relationship with your nonprofit mission.

Personalizing every letter sent to donors for tax purposes can sound like a major chore, creating a barrier to other high-value touchpoints with donors. With automation solutions, like AutomateGenius, sending tax letters can be a smooth and painless process.

Database View in Raiser’s Edge

Blackbaud Raiser’s Edge does offer a canned solution for running an Annual Report of gifts a donor made, which meets the threshold of IRS requirements. These reports have limited ability to be edited but can include the goods and services statement at the bottom.

In the past, a batch of annual report statements would be run and then a separate cover letter was created. This process required nonprofits to print the acknowledgement letter and statements and then collate and stuff into envelopes. This was an overly arduous process, using a lot of staff time.

Webview in Raiser’s Edge NXT

Blackbaud Raiser’s Edge NXT does provide nonprofit organizations with an option to run a report and send an e-mail to the donor. While the statement is well organized, this solution is not customizable.

One of the challenges with this current process in Web View, is that this is only cash or credit card gifts and does not include a description of any in-kind gifts made. Any gifts a donor made in-kind or stock gifts, are not going to appear on this statement.

This creates one more hurdle for staff in capturing a donor’s full yearly giving. This document is also missing the statement that no goods or services in exchange for your contribution were received.
Some nonprofits find work-around solutions by using a PDF editor, but this is a cumbersome option.

Automated options for End-of-Year Tax Statements to Donors

Nonprofits seeking a more customized solution to not only meet IRS requirements, but also personally thank donors for their generosity can now turn to AutomateGenius. Creating and sending tax statements and end-of-year thank you letters to donors should be a seamless and smooth process for nonprofit organizations.

AutomateGenius can take the headache out of tax statements by automating this process. Custom automation will offer a tile where your staff can run either a statement of all gifts or gift summaries.

The AutomateGenius automation for end-of-year statements fully customizes the statement for each donor, there is no need to remove extra rows in the list of gifts or fix errors in mail-merged letters. The automation saves valuable time for staff, so they can spend time on high-value activities that move the mark in raising dollars for your important mission.

With AutomateGenius, a workflow can also be built to email tax statements to donors, saving time and postage. This solution also allows an action to be created and the tax statement to be automatically saved to the donor’s record.

Learn more about the genius of AutomateGenius for end-of-year tax statements for donors in the webinar: How to Save Time and Money on Your End-of-Year Tax Letters. And for regular insights delivered right to your inbox, sign up for the Prenger Solutions Group newsletter.