In order to regulate fundraising in the United States of America, the IRS (A US government agency that collects tax) has imposed certain guidelines. There are several things that you need to keep in mind regarding the IRS rules for fundraisers.

It is important for you to understand that not all organizations that are involved in fundraising activities get exemption from federal income taxes. There are certain qualifying criteria that such organizations must meet in order to qualify for federal tax exemptions. In general, organizations that are involved in educational, literary or public safety work and the ones that are registered to operate as a scientific, charitable or religious body qualify for exemption.

IRS Guidelines For Fundraisers

Obtaining The Non-Profit Status

As per the IRS guidelines for fundraisers, an organization must first obtain a 501c(3) status from the Internal Revenue Service before claiming exemption from taxes for the income generated through fundraising.

Penalties For Not Making A Written Disclosure About Donations

It is legally mandatory for all such organizations that are seeking tax exemptions for fundraising money to attach relevant documents along with their tax filing that should provide complete details about the money they received through donations. The organization can be fined for up to $5000. In general, a fine of $10 is imposed for every individual donation received. However, there are also provisions on how to get this penalty waived. The penalty might be waived in a situation when the Internal Revenue Service is convinced by the organization that there were some absolutely unavoidable reasons due to which they could not make the written disclosures.

IRS Form 990

The IRS guidelines for fundraisers require all non-profit organizations who want to claim tax exemption for fundraising money to file Form 990 with the IRS. This is where you have to provide complete details of all donations and gifts that the organization received during the tax year. However, it is important here to keep in mind that certain organizations are exempted from filing this form, such as the ones who received less than $25000 in terms of donations and gifts. In case you do not file the form 990, it will be mandatory for you to file an e-postcard, which is an electronic notice.

Recordkeeping

As per the IRS guidelines for fundraisers, the Internal Revenue Service usually rejects claims for tax exemptions for fundraising money if no relevant documents have been attached. Therefore, it is very important for you to maintain a good recordkeeping system. You must always keep proper records of all contributions made by donors. The record should include complete details, such as the name and address of the donor, the amount (market value in case of gifts) of contribution and the type of contributions received (money or gifts).

The IRS guidelines for fundraisers also require charitable organizations to specify the exact amount of donation that is tax deductible and the total fair market value of the services or gifts received. For example, if you receive $30 for an item that costs $10 only, you will have to mention it in your tax filing that $20 of that specific donation is tax–deductible.