As 2023 has drawn to a close, tax season looms on the horizon, and we nonprofits gear up for a unique opportunity—issuing tax summaries to our donors.
Bloomerang refers to them as tax summaries—which they are—but they also summarize each donor’s cumulative giving. They form a powerful document informing donors about their total annual giving—a rare moment in the fundraising process. Allow me to explain.
Cumulative giving statements
Donors rarely know or keep track of their cumulative giving, so when you point out the total, they’re usually quite pleasantly surprised.
Sending annual tax summaries to your donors provides an opportunity to make them feel good about how generous they have been. I highly encourage you to make the most of this opportunity.
While tax summaries might seem like just another administrative task, savvy nonprofits use them as powerful cultivation moments to deepen relationships with donors.
Major gift officers often prepare TOTAL GIVING statements before meeting with their major donors because they, too, lose track of their cumulative generosity.
A donor who sees the history of their contributions is more likely to feel a sense of loyalty to your organization—a crucial factor in retaining donors over the long term. When donors feel a solid connection to your cause and understand the impact they’ve had, they’re more likely to stay committed.
Understanding a donor’s cumulative giving also helps your organization to build and nurture relationships strategically. You can identify donors who’ve consistently supported your cause and tailor your engagement strategies to deepen those relationships—potentially involving them in higher-level giving or leadership roles.
Further, high cumulative giving offers opportunities for special recognition. You can create giving societies or exclusive events for donors who’ve reached specific cumulative giving milestones. These events offer an excellent opportunity to acknowledge their generosity and provide incentives for continued support.
It’s a home run to show donors their cumulative annual or total giving because it goes beyond individual transactions and builds a narrative of shared impact, recognition, and trust. This lays the foundation for a lasting and mutually beneficial relationship between the donor and your nonprofit organization.
What are tax summaries?
In the nonprofit world, tax summaries are the golden tickets that encapsulate a donor’s generosity throughout the preceding calendar year. The statement itemizes each donation and shows the total donated.
Using the Bloomerang platform, you can effortlessly email year-end tax summaries to your entire database in just a few minutes. The email contains a secure link for recipients to download a PDF containing a comprehensive listing of their tax-deductible contributions from the preceding calendar year.
Pre-built templates make the process of running a list of donors easy. You can use them as is or edit them to suit specific audiences or needs:
- Year-end Tax Report (Revenue)
- Year-end Tax Report (In-Kind)
The IRS requires nonprofits that receive more than $250,000 in annual contributions to send year-end tax documents to donors. They’ll assess penalties if you don’t.
It’s important to understand the specific rules and regulations surrounding charitable donations and tax deductions, as they can vary based on your donors’ particular circumstances and the type of organization they donate to.
For a comprehensive overview from the U.S. Chamber of Commerce, see How Do Charitable Donations Impact Your Taxes? You can share this link with your donors.
Why should nonprofits care?
Beyond the apparent legal and accountability aspects, tax summaries offer nonprofits like yours a unique opportunity to express gratitude and reinforce the impact of your donors’ contributions. It’s not just about numbers; it’s about recognizing the individuals who make a difference.
The cultivation moment: Turning receipts into relationships
Issuing tax summaries is more than just a paperwork drill. It’s a chance for you to turn a transactional moment into a cultivation opportunity. Here’s how:
- Express gratitude: Include a heartfelt thank-you message in the email accompanying the tax summary. Let donors know the measure of their impact is more than dollars and cents.
- Highlight impact: Take the chance to showcase a tangible outcome of the donors’ contributions. Share a success story, donor testimonial, or an update on projects funded by their generosity.
- Invite engagement: Encourage donors to ask questions, make suggestions, or share their thoughts. Use this as a segue to deepen the connection and understanding between the nonprofit and its supporters. Offering a donor survey would be advised.
- Make it personal: If your platform allows, customize the tax summaries to reflect each donor’s unique journey with your organization. Acknowledge milestones, anniversaries, or any unique connections that make them an integral part of your community.
- Encourage social sharing: Include social sharing buttons or pre-drafted messages in your email. Gift your donors the ability to become ambassadors by sharing their contributions and support with their networks, potentially expanding your reach.
Sending year-end tax summaries is a great way to help donors get the tax credits they deserve while thanking them for their impact on your organization.
Tax summaries are not just about numbers but about nurturing a sense of belonging and appreciation among donors.
What are your thoughts about tax summaries? Please share them in the comment section below.