By: Doron Barbalat, Marketing Manager at Causeview
Canada Revenue Agency regulations are complicated, but they play a big role for our nonprofits. Receipts from gifts made to your organization are vital as they can be used for deductions on a donor’s income tax filings. However, these receipts come with several rules and requirements.
Accurately creating and issuing them to supporters can be difficult and time consuming. With the right knowledge and technology, though, they can be a simple way to continue delighting donors. With that in mind, here are six Canadian tax receipting tips you may not be familiar with:
1. Receipts must be written in the payee’s name
It can be common for an individual to donate to your nonprofit on someone else’s behalf. Perhaps a parent contributes on behalf of a child or a business owner donates for the company.
Regardless of the name the donation is made under, the receipt should be issued to the payee. This information can be captured from the billing information on a gift, rather than the donor name provided.
2. Receipts need to account for ‘advantages’
Some donations will come with a benefit to the contributor. For example, your nonprofit may be running a campaign where donors who give more than $100 receive a t-shirt, raffle ticket, or bobblehead. When it comes to tax receipts, these are considered ‘advantages.’ Their value is to be subtracted from the amount donated, and thus reducing the net amount on the tax receipt. So if a donor gives $100 and receives a $10 ‘advantage’, they would receive a tax receipt for $90.
Fundraising event tickets typically work the same way. If a ticket costs $250 and includes $100 of advantages – such as food, entertainment, etc. – then the purchaser would receive a receipt for the net amount of $150.
When creating your tax receipts, these advantages should be clearly described and have their value stated.
3. You can’t issue tax receipts for services provided
Nonprofits certainly rely on the help of consultants, experts, and other professionals who volunteer their time. However, even if the individual would normally be paid for that work, nonprofits may not issue a tax receipt for the value of the service. This is because CRA regulations state that a donation must be property contributed such as money, stock or goods.
However, you may still be able to issue to a tax receipt for direct expenses incurred to provide that service. For example, if a consultant has to stay in a hotel to meet with your organization for three days, you can issue a receipt for the cost of their room.
4. In-kind donations have a fair market value
As mentioned above, you can issue a receipt for non-monetary donations of property. This includes new or used goods provided for your organization. For example, a t-shirt printer may decide to contribute all the shirts needed for participants at a walk-a-thon. Or, an individual may decide to donate slightly used TVs from their house for you to use in your office conference rooms.
Receipts for these in-kind donations should be provided based on the fair-market value. Sometimes, it is easy to determine. The t-shirt printer will have an advertised price for each shirt. If they donate 100 shirts that are typically sold for $8 each, then the fair-market value of their donation would be $800.
In other cases, you may need to do a little bit more research. For three-year old TVs, you can contact used electronics stores to find out the cost. You may make estimates in some cases if the cost isn’t clear, however, the CRA recommends using an outside appraiser if the value is over $1,000.
5. Year-end consolidated receipts for recurring donors
Many of your donors will contribute multiple times throughout the year. For your monthly recurring donors, this can really add up.
The CRA gives you the option of issuing consolidated receipts at year-end for all the gifts a donor provided throughout the past year. This is typically a best practice for your monthly donors, although you may want to give them the option of choosing a consolidated receipt or a regular receipt for each gift.
6. Duplicate receipts must reference the original
It can be common for your donors to misplace a receipt you have issued. The CRA has very clear guidelines for handling these cases. The original receipt should be voided by your nonprofit. A replacement should be provided that references the original receipt’s serial number and clearly states that it is a duplicate.
The same principal can be applied when a receipt contains an error, such as the wrong amount or a misspelling of the donor’s name. The original should be canceled, and the new receipt should state that it is a replacement of that specific receipt number. Of course, having an automated system that creates and provide receipts based on integrated gift processing will help reduce these errors, saving time, complication and donor satisfaction.
About the author:
Doron Barbalat is the Marketing Manager at Causeview. Proudly Canadian, Causeview Fundraising helps nonprofits trust their donor data with donor management and gift processing software built for Salesforce. Learn more at www.causeview.com.