How to Handle Accounting and Reporting for Stock Donations
According to Nonprofitsources.com, 31% of the donors worldwide give their charities to international NGOs. It means that you can get a good amount via charities if you are such an organization. However, getting these stock donations in your account for your organization isn’t the toughest part of the process. It is actually where things get a bit more complex. You need to pay attention to these things because accounting your stocks can help you manage and regulate them better.
Is It Important to Report and Account For Your Stock Donations?
According to a study by Texas Tech University, non-cash donations such as stocks were one of the key players in growth for nonprofit organizations. The study concludes that non-profit donations lead to an average of 66% growth as compared to cash donations.
These donation accounts and tracking helps the organizations maintain their 503 crucial statuses. Meaning, it allows these organizations to get exemption from federal income tax. Therefore, every organization should know how to track reports and account for their organization’s stock donations. There are a few ways that you can achieve this, and we have compiled some of them for your guidance.
What Does The IRS Require For Stock Donations?
The IRS, also called the International Revenue Service, oversees the stock donation matters. It provides all organizations with its requirements for complete legal functioning. Following are the things you should know if you are dealing with the IRS for your donation. It is important to note that tax situations can be different but following the steps below might help you in most situations.
Stock Donation Tracking Requirements
Tracking stock donations is crucial, and it is important to hire someone competent for it. Your organization could get into trouble for it or even lose its 503 status. Most of the organizations hire their finance managers or an accounting team to overlook these matters. It doesn’t matter who handles it, as long as the experts know what they are doing. You should add the following steps to track your stock donations from now on, if you want to keep things simple:
- Date of receipt: you should list the date when you receive the stock donations for future reference.
- Value of stock on that date: stock values are volatile; therefore, you should pen down the value of a stock on the day you receive it. It will save you from false claims and help manage things better.
- Stock ticker: you should add the stock ticker (the price for certain securities throughout the trading interaction).
- The number of shares: it is wise to list down the exact number of shares that you receive in charity to keep things crystal clear.
- Date of sale: you should keep a record of the date you sell particular stocks to get cash.
- Value of stock at the sale: ensure listing the per stock value on that day.
- Any administrative fees: lastly, you should also mention any administrative fees that you pay through the process.
Following the above-mentioned requirement will help you reduce risks and avoid them fully in most cases. Let us now move on to the official requirements for report stock donations
Stock Donation Reporting Requirements
Following are the reporting requirements you need to fulfill when dealing with stock donations according to the IRS.
Record The Donation:
The General Accepted Accounts (GAA) requires the holder to record the assets according to the fair market value that day. It might be a little difficult for you to gather so much information in a single day. However, you can ask the donors to fill out a Stock Donation Form, which will provide them with all the information needed. If the donors do not want to go through the form, you can ask them to provide the info on call.
You should calculate the stocks available to the general public by formulating the average high and low price of the stock on the same day. However, things are a bit different if you deal with closely held stock. If you receive an amount of $10,000 or higher in closely held stock, then you should add a fair market price from an independent appraiser. Following these steps will fulfill IRS’ requirement for donation reporting.
How Can You Make This Easier?
We know that all of this sounds a little too complex. However, there are ways that you can make your lives easier. Stock Donator can assist with the process and allow companies to donate directly from their site. They will provide you with all the requirements for the tracking and recording of your stock donations.
Conclusions
So, as you can see handling accounting and recording stock donations isn’t difficult. We hope that you find this article helpful. You can reach out to us for more information on the topic and get assistance from qualified experts.
Sources
https://academic.oup.com/ej/article/129/622/2608/5498293
https://www.learningtogive.org/resources/nonprofit-organizations-definition-and-examples
