Content of a donation receipt; Consequences and improper use of donation receipt; Best practices - Segment 5
Content of Donation Receipt
We get into the contents of a donation receipt. Every element on this slide is considered a mandatory element. What we mean by that is, if the situation applies then you need to include that element. So if you're writing receipts for gifts in kind, then you will need the actual date of the donation, the appraiser if you used one, a brief description, however if it's a cash receipt only then those elements aren't required.
There are no new requirements this year and we do have samples posted on our website if you're interested in knowing some examples, templates for how to set up your donation receipts. Many charities we've found have a series of templates set up, so they have a cash receipt, a gifts in kind receipt, and the elements that are necessary for each of those receipts are outlined in those templates.
Examples of Improper Use of Donation Receipts We get into some examples of improper use of donation receipts. It's important for charities to realize that they're responsible for all the receipts that they write, and they must account for those receipts on their Registered Charity Information Return (their T3010) and in their books and records.
So charities should not be lending their number to other organizations or issuing receipts on behalf of other organizations. Secondly, it's important that charities issue their receipts in accordance with the Income Tax Act regulations, so you want to make sure that they're issued accurately; with the accurate FMV and that there is no missing information. Charities must know when they can and cannot issue a receipt, so that's what this session is about, when can you issue a receipt for a voluntary transfer of property, when can you not, services for example. So knowing the distinction, and knowing when it's appropriate to write a receipt and when it isn't.
Also, an issue that's come up in the past couple of years is issuing receipts for inflated FMVs; issuing a receipt in excess of the actual FMV is technically an abuse of the tax system. Now we understand that it's not always deliberate, there are times when charities may issue the receipt for an inflated amount but it's not on purpose, but it is still ultimately the charity's responsibility to ensure that the appropriate amount is reflected on the receipt.
Charities shouldn't rely solely on what the donors say is the value, so ask questions, get appraisals when necessary and if the value can't be determined then don't write a receipt. Ultimately, if you can't establish the FMV and you're not comfortable with that value then a receipt should not be issued.
Consequences of Improper Receipting
We talk about the consequences of issuing improper receipts. Sanctions are associated with issuing improper receipts; this slide has some examples for you. If you issue a receipt with incorrect information, there could be a penalty of 5% of the value of the amount that is stated on the receipt and that penalty increases to 10% if it is a repeat infraction within 5 years. Ultimately if the charity continues to contravene the Income Tax Act it does risk losing its registration. Certainly if you're concerned about any particular transactions you can give us a call and we can guide you on what you should do. Document everything in your books and records if you've entered into a transaction you're not comfortable with, and make it clear the steps you've taken to correct that.
Receipting Best Practices Over the past couple of years we've been collecting some best practices. What I'd like to point out is that this slide is not a charity's legal obligation and it is not CRA's policy. It is just some best practices that we've collected over the years as we've done sessions with charities and we've heard from you about things that have worked well and we thought we would share them.
Some noteworthy best practices - provide training, have your new volunteers sign up for these webinars, come to the sessions to learn about the rules that surround gifting and receipting, establish a receipting policy and make that policy known, limit the number of people in your organization that can issue receipts that helps you target your training to those individuals, it also helps you re-train if you've entered into a situation where you've been issuing receipts improperly. Keep your donors informed, let them know if you're putting limits on your receipts (for example, not issuing receipts for less than $15) nothing wrong with making administrative policies like that, just make your donors aware so that your donor relations are kept in good order and the expectations are met.
Closing Remarks We talk in closing, while there's no requirement to issue a receipt; if you do we recommend that you issue them by February 28th. This is purely so that your donors can get their tax documents in order and file their returns on time. If you have gifts for cash, you can issue one cumulative receipt over the entire year (so you don't have to issue separate receipts) but you do have to issue separate receipts for gifts in kind and that is because different elements are required on those receipts (description of the item, date it was transferred) so you do need a separate receipt for each gift in kind.
The Operating a Charity section on our website, I don't know if you've been to our website recently, but if you go to main page under Operating Charities there's lots of information, a whole section dedicated to issuing receipts. Certainly if you have questions or if you are looking for more information you can look there, or give our client service agents a call at the 1-800 number that will be posted at the end of the presentation and they can certainly help you out answering any questions that you may have.
Thank you and we hope you enjoyed this webcast.
The Charities Directorate will continue to offer webinars, visit our Charities Information Webinars website for more information. Also, if you haven't already signed up for the electronic mailing list we invite you to register on the Charities and Giving website you'll receive 1 to 2 emails a month with new information and updates affecting registered charities. The electronic mailing list is also one of the means we use to let you know when the next Charities Information Webinars will take place and how to register.
If you would like any more information on this topic, please contact our client service 1-800-267-2384.
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