December 10, 2015

Proposed Change for Donor Written Acknowledgements

Question:

I recently attended a conference, and the speaker mentioned that donor social security numbers will need to be collected in the future. The social security numbers will then be included on donor contribution acknowledgements. Is this true?

Answer:

This is partly true. Published on September 17, 2015, the IRS issued proposed regulations for donee reporting. At the date of this blog posting, the regulations are still only proposed. In addition, if the regulations become final, the donee reporting with donor social security numbers will remain optional.

If a nonprofit chooses to use the optional donee reporting, the nonprofit will (1) file a specific-use form with the IRS by February 28 for contributions made in the prior calendar year and (2) provide a copy to the donor by the same February 28 date. The nonprofit will report on the IRS’s specific-use form all current required information (e.g., amount of cash, no goods or services disclosure) and the new required information: donor’s name, address, and social security number.

Rather than filing the IRS’s specific-use form, nonprofits may continue issuing the usual contemporaneous written donor acknowledgement after a donor contributes $250 or more, as currently required by the IRS under IRC Section 170(f)(8).

In our opinion, the proposed regulations if finalized and adopted by nonprofits will create a need to improve donor reporting processes and create a significant risk to both the nonprofit and the donor. First, the donor must be willing to trust the nonprofit with his or her social security number. Second, the nonprofit must have sufficient controls in place to protect the donor’s sensitive information. Most small nonprofits do not have checks and balances in place to protect such information.

2 comments:

  1. The IRS withdrew its proposed changes. Please see our January 8, 2016, blog post with this update.
    Tara
    MinistryCPA

    ReplyDelete