The example below will explain the process of how to record a contribution that is being paid from funds for which the donor has already taken a tax deduction (e.g. a charitable donor advised fund, retirement account, etc.) such that the donor will not receive a second tax deduction on the contribution:
- You create pledges for member dues at the beginning of the fiscal year for your members, and send out statements.
- A short time after, you begin to receive payments, one of them a check from David Cohen who has opted to pay $1,800 for member dues with funds from his donor advised fund ("Charles Schwab Charitable Trust").
- Like with any other pledge payment, you would access David's contact record, click the Financial Summary tab and then click the "Record Payment or Adjustment" button:
- You would record the pertinent information (e.g. payment method, check number, etc.):
It is a good idea to include a note in the Source field indicating the origin of the funds - the reason for this will become apparent in the last steps of this example.
- Scroll towards the bottom of of the screen and click the small triangle next to "Additional Details" to expand the section:
- Enter the full amount of the contribution ($1,800 in this example) in the Non-deductible Amount field, then click the Save button:
- To view the results of the contribution just recorded, click on David's Financial Summary tab - note in the "Received Details" section, the contribution source explaining that the funds came from a donor advised fund is clearly visible:
- In the "-select information to display-" drop down menu, click to select "Show preview of tax information for current year"):
- Note that the contribution is showing as non-deductible for the full amount ($1,800). Since member dues are typically tax deductible, the inclusion of the source indicating that the payment came from funds for which the donor has already taken a tax deduction will limit any confusion as to why the contribution was recorded as "non-deductible". The source will also be viewable to the donor on the tax letter: