What to absolutely include in your year-end tax letter

Posted December 13, 2018 by Hunter Williams

what to include in year-end tax letter

In this article, we offer some thoughts on what to include in your year-end tax letters and also show how to create a customized letter using Little Green Light’s end-of-year letter template (included in every LGL account).

We hope you can take some time to celebrate the end of the year! But once you’re back at your desk, you have a golden opportunity to reach out to all of your donors from the past year and share how their giving brought some joy to the world.

What to include in your year-end tax letters

A “thank you”! 

In addition to providing the necessary tax receipt information your donor needs, your year-end letter can be celebratory and used to thank your donors for what they’ve helped accomplish. Help them feel the direct connection between their giving and its beneficiaries. For example, rather than say, “Here’s what you’ve helped us accomplish,” cut out the middle person and just say, “Here’s what you’ve accomplished!”

Impact of the donation 

If your donor gave to a specified fund, be sure to share what that particular fund has delivered. This demonstrates your good stewardship of their donation.

 

Tax requirements

Only donations made to 501c3 organizations are tax exempt, so you need to be a 501c3 to issue tax-deductible acknowledgments. The IRS requires that you acknowledge any single donation of $250 or more (but we recommend acknowledging donations of all sizes) and that you include the following information:

  • Name of your organization
  • Dollar amount of cash contributions (good idea to include the date of each gift)
  • Description (but not value) of non-cash contributions
  • Statement of which portion of the gift is tax deductible, and for the non-deductible portion, a description and good faith estimate of any goods and services you provided

Source: IRS, Charitable Contributions – Written Acknowledgments

 

Create a customized letter or email in LGL

A basic template is available and ready to use in your Little Green Light account. To locate it, go to Mailings > Templates > Letter templates > Examples.

example year-end tax letter template

 

Note that this is a “Letter Template” and not an “Acknowledgment Letter Template”, or “Ack. Letter Template”. Acknowledgment letter templates are designed to be used for immediate acknowledgments after a gift is made.

You can apply this example template to a mailing without making any changes to it, but we recommend downloading the Microsoft Word file so you can customize it for your own letter template.

The LGL template uses the following merge fields:

  • [[gifts.2018.total]] – The total giving amount received for the calendar year
  • [[gifts.2018.deductible_total]] – The total of the tax-deductible amounts for monetary gifts received
  • [[gifts.2018.list]] – An itemized table of gifts showing date, deductible amount, and payment type

 

A note about about in-kind gifts

The IRS advises against including a deductible amount for in-kind gifts, but recommends instead providing a description of in-kind gifts (leaving it up to the donor to do the assessment of the in-kind gift’s value). Accordingly, the gifts.2018.deductible_total field referenced in the list above shows a sum of the deductible amounts for monetary gifts received, but not in-kind gifts. The gifts.2018.list table does include in-kind gifts but does not show a dollar amount for those.

 

2018 year-end tax letter example in LGL

Here’s what our letter will look like, showing the three places you should customize:

sample year-end tax letter

 

Customizations you can consider using:

  1. Print the letters on your letterhead, or add an image to the Word document template.
  2. Add some more details to the body of your letter about the positive impact the donor’s gifts generated. Consider hand writing a personalized P.S., at least for the donors you consider most important.
  3. Note the tax statement in the footer of the Word document. You can add your EIN here and a statement that you are a 501c3.

 

Email option

You might choose to send physical year-end tax letters to a subset of your donors and send emails to the rest. If so, you can copy and paste the contents of the Word template into a new blank email template. Just be sure to create a regular Email Template, not an Ack. Email Template. You’ll want to make sure you copy/paste the footer (the tax statement) into your email as well.

 

Advanced

You may consider also using any of these additional merge fields in your year-end tax letter:

  • [[gifts.2018.count]] – The number of gifts received in 2018.
  • [[gifts.2018.list:fund,campaign]] – Use this format to include campaign, fund, appeal, and/or event columns in your table.
  • [[gifts.2018.custom_list]] – This field is similar to [[gifts.2018.list]], but it has more options. The field should be formatted like this: [[gifts.2018.custom_list:campaign,fund,category]] – Allowed columns include campaign, fund, event, deductible_amount, notes, payment_type, category.

For the complete list of mail merge fields, download the Merge Field Reference by clicking the button in your Little Green Light account, in Mailings > Letter Templates.

Are you a visual learner? Join our webinar on how to use this year-end tax letter template

We’re hosting two webinars in January that will walk you through how to use Little Green Light’s letter template. And, this is a great chance to get a strong handle on how to create mail merge letters in Little Green Light in general.

January 8 at 3pm ET, 12pm PT

January 24 at 12pm ET, 9am PT

 

Register here for either date today!

 

References:

4 thoughts on “What to absolutely include in your year-end tax letter

    1. Hi Kellie,

      We’d suggest creating a template in LGL to include your logo and such. If you need some help with that, feel free to reach out to our support team using the contact form located on the Help page in your account.

      Thanks,
      Timi

  1. It would be nice if the system would allow PDF attachments for the Year-end tax statement so that donors can print out the statement for their records. I would like to send mine out by email but there is no option to include attachments in the general email template.

    1. At this time, we only allow attachments to acknowledgment templates but we appreciate the suggestion to add this functionality.

      Thanks,
      Timi

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