If you are one of the many organizations that are qualified by the IRS to receive deductible charitable contributions, then the months of December and January can be a tricky time of year – even more so if you have a December 31st year end. Deciding exactly when an organization should record contribution revenue, and when the donor should receive the tax deduction can cause confusion.
Say an organization receives a check via USPS. The check is dated December 31, 2011, but the check was post-marked on January 3, 2012. Is it a 2011 or 2012 donation? When it comes to the benefactor, according to IRS Publication 526, “A contribution is made at the time of its unconditional delivery. A check that a donor mails to a charity is considered delivered on the date mailed.” Still a little vague, right? Judgment definitely comes into play in these circumstances. In the situation above, the donor should receive the donation for the 2011 tax year, and they are probably patiently awaiting the contribution letter to give to their tax accountant. If the organization received the check in February, then the donor most likely failed to mail the check in time to meet IRS criteria. Whatever the situation, it is the donor’s responsibility to prove when the check was mailed.
In relation to the organization’s bookkeeping, Accounting Standard Codification 958, Not-for-Profit Entities, states that contributions received should be recognized as revenues in the period received (ASC 958-605-25-2). Regarding the above situation, the contribution revenue should be recorded in the 2012 fiscal year. In addition to recording the revenue, not-for-profit organizations should also be aware of any conditions or restrictions, which require the donation to be used for a specific purpose.
Additional notes for donors per IRS Publication 526:
- Contributions charged to your credit card are deductible in the year you make the charge.
- Contributions made by a pay-by-phone account are deductible on the date the financial institution transfers the funds.