How to Issue Donation Receipts As A Charity

There are several important dates in the charity calendar, from Giving Season to awareness  days and months such as Black History Month, Earth Day or Truth and Reconciliation. Alongside these important fundraising dates is tax season! “The Canada Revenue Agency suggests that registered charities issue receipts by February 28 of the calendar year that follows the year of the donation. This allows individual taxpayers to claim their donations on their annual income tax returns.” 

As a result, February can be the busiest time of the year as you’re making sure you have all your ducks in a row so donors have their donation receipts to claim on their tax return. However, the tips in this blog are evergreen as donation receipts can be issued throughout the year.

In this blog, learn why donation receipts are important, what they require and how a purpose-built system could help you streamline your process and ensure you have CRA-compliant tax receipts.

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Table of Contents

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Did you know there is no actual requirement for charities to provide official donation tax receipts? This is a common myth! So… what’s the big deal with tax receipts if we’re not required to issue them? 

Being able to issue official Donation Tax Receipts is one of the most important benefits of being one of Canada’s 86,000 Registered Charities. People give to charities for many reasons. Sector Source shows that the major reason Canadians give is because they care. 

• compassion for those in need - 89%
• personal belief in a cause - 85%
• contribute to our communities - 79%

While getting a tax receipt is rarely the deciding factor, the ability to receive a tax credit does influence a donor’s likelihood to give, with 40.7% of donors agreeing that the tax credits play a part in their decision. This trend is particularly strong among younger generations; this is significant as charities typically struggle to engage younger generations in giving and are finding themselves increasingly reliant on a smaller group of aging donors. 

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The provision of a tax receipt can be a great talking point to bring up with those that do not currently give. Some that don’t donate, feel that they cannot donate at this time. In the same report, 35.4% have said that the reason they haven’t is because they can’t afford to give to charity. However, depending on the province your donors reside in, donors can receive as much as 53% back through charitable tax deductions.

• ON - 50%
• BC - 45% 
• QC - up to 53%

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One best practice is to educate donors about the potential tax credit benefits they will receive from donating - this is something CanadaHelps does in its yearly appeals. We have also incorporated a simple, interactive tax benefit calculator on donor accounts so donors can see how much they will receive back in donation tax credits. Donation tax credits can offset federal and provincial taxes, be carried forward for up to 5 years and cover up to 75% of income.

Issuing a tax receipt is not a requirement but it does have huge benefits to your organization and donors. Do what is best for your charity and ensure donors are aware of your policies, whether that means you choose not to issue tax receipts at this time, have a minimum donation threshold for tax receipts or other policies around in-kind donations.

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So you’re sold on the benefits of tax receipting but not sure where to start? You’re not alone. 

According to the CRA, 89% of charities are issuing them inappropriately.

Some of the most common issues were:

• issuing a receipt with inaccurate or missing information;
• issuing a receipt for a transaction that does not qualify as a gift;
• issuing a receipt on behalf of another organization; or
• issuing a receipt for an inflated amount.

Let’s look at each of these issues:

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Issuing a receipt with inaccurate or missing information;

The CRA will always be the ultimate authority on what needs to be on the tax receipt, and this can change from time to time so do defer to the CRA website if you’re ever in doubt.

For cash gifts, the receipt must have

1. a statement that it is an official receipt for income tax purposes
2. the name and address of the charity as on file with the Canada Revenue Agency (CRA)
3. a unique serial number
4. the registration number issued by the CRA
5. the location where the receipt was issued (city, town, municipality)
6. the date or year the gift was received
7. the date the receipt was issued
8. the full name, including middle initial, and address of the donor
9. the amount of the gift
10. the amount and description of any advantage received by the donor
11. the eligible amount of the gift
12. the signature of an individual authorized by the charity to acknowledge gifts
13. the name and website address of the CRA

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Some of the criteria that stand out are:

• A unique serial number
• The total vs. eligible amount of the gift - Both amounts should be there even if there was no advantage - in that case the eligible amount would match the total amount.
• The name and website address of the CRA changed some time before 2019 so if you’re using templates from before this time you do need to update them to the new name and website address of the CRA

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Issuing a receipt for a transaction that does not qualify as a gift;

Donation Receipts can only be issued when there has been a voluntary transfer of property. Property includes cash, stocks, equipment, etc. - it has to be tangible. This means donation receipts cannot be issued for a gift of service.

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Issuing a receipt on behalf of another organization;

If you are receiving a disbursement from CanadaHelps or a gift from any other charity, you do not need to issue a receipt. This is one we have firsthand experience of as we regularly receive receipts from other well-meaning charities!

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Issuing a receipt for an inflated amount;

Issuing a receipt for an inflated amount typically occurs when an advantage has not been considered or a fair market value has not been properly calculated. The CRA lists property, use or enjoyment of property, provision of services and other benefits as possible advantages. This could look like event access, ticket discounts, parking vouchers or even a burial plot. These all make up an advantage that should be subtracted from the total donation amount to give an eligible amount.

If the combined advantage is less than 10% of the total donated, it can be considered “de minimis” or of nominal value and not considered an advantage. 

On the other hand, if the advantage totals more than 80% of the total gift, it will not reach the intention to make a gift threshold and a donation receipt cannot be offered.

Fair Market Value (FMV) is the value you can get for the item. For example, if your donors receive an advantage such as a meal at a local restaurant, the advantage would be the cost of the meal as it is on the menu (even if the restaurant did not charge your charity for the meal). If you are unable to determine the fair market value of an advantage, it is best to err on the side of caution and not provide a donation receipt.

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Replacing Lost Receipts

To replace a lost receipt, a registered charity can issue a replacement, which must contain all the required information plus the serial number of the lost receipt. The replacement receipt should also state that it “cancels and replaces the lost receipt.” The charity's copy of the lost receipt should be kept and marked “cancelled”

For a spoiled receipt, a registered charity can issue a new receipt but must keep the original copies (both the donor's and charity's) marked "cancelled”.

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As you can see, a lot goes into ensuring your donation receipts are CRA-compliant, but it’s worth the effort to get it right. 

Software that is purpose-built for charities, helps you get it right so you’re not having to constantly cross-reference and copy data from sheets to templates. It allows you to centralize your donor information into one place so you can work collaboratively with your team to:

• Issue One-Time or Aggregate Tax Receipts with the click of a button
• Send personalized and branded CRA compliant Tax Receipts 
• Send Tax Receipts by Email or Generate them for Mail
• Track which donations have been receipted and which have not
• Send an additional thank you message as part of generating your tax receipt
• Void and resend receipts with the click of a button
• Find all of your receipt data stored on secure cloud servers, hosted in Canada