PayPal will transfer to your organization a net amount of $97. Again assume our Donor is donating $100 and PayPal is charging a $3 fee. Companies like PayPal and Network for Good deduct a fee from the donation and pay only the remainder to the nonprofit. How Do You Handle Processing Fees From PayPal?Īs mentioned earlier, some systems handle the donation collection process differently.
#Paypal transaction fees for nonprofits full
The donation is the full amount of the intended donation plus the extra donation for the cost of covering processing fees. In this situation, there is no difference in the accounting treatment for the transaction. The organization will incur a slightly higher fee on the transaction (the fee is determined by multiplying the donation times the rate charged by your processor). In actuality, the Donor is really just increasing the amount of their donation. The donor will be charged an extra fee to cover the cost of the processor. Many online donation systems give donors the option to pay the credit card fee. What if the Donor Pays the Processing Fee? For IRS purposes, the full $100 should be credited to the donor, regardless of processing fees. It is not a reduction in the donation made by the donor. The fees charged by the processor are actually a cost your organization incurred for using the processor. You do not need to show the fee paid for collecting the money. If you receive a $100 donation, the individual donor record should show the $100.00 donation. How much do you Acknowledge the Donor For When They Give Online? They then credit your account for the net amount of the transaction (donation less processing fee).
Organizations such as PayPal tend to take the fee out of each individual donation. At the end of the month, they debit your account for the total of all processing fees. One method used by most credit card processors is to deposit the full amount of the donation as it settles.
From there, the $3 processing fee is recorded in an expense account in your accounting ledger only.Ĭredit Card processors will deposit the donation in your chosen bank account in one of two manners.
#Paypal transaction fees for nonprofits software
You would record the $100 in your donor database and accounting software as revenue (donation Income). Assume that someone gives your organization $100 and the processor charges a $3 fee. How do you Account for Credit Card Fees When Collecting Online Donations?Ĭredit card processors charge a fee for the service that is usually a percentage of the transaction. Are you tracking these fees correctly? Find out below. In this article, we cover how nonprofits should handle online donations and processing fees from an accounting perspective. Online payment processors charge small fees for accepting online donations. It is no surprise that millennials prefer online and social giving, and organizations need to provide an outlet for this demographic. Collecting online donations is a great way to reach potential new donors.
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