Morison Cogen LLP

Accounting, Audit & Tax Services

Client Portal | Secure Upload267.440.3000

  • Home
  • About Us
    • What We Do
    • Why Choose Us
    • Partners
    • Managers
    • Partners Emeritus
  • Services
    • Accounting
    • Audit
    • Tax
    • Financial Management
  • News and Posts
    • Business
    • Employer
    • ETRA
    • Federal Tax Posts
    • Individual Tax
    • Not for Profit
    • Small Business Tax
    • Featured
  • Contact Us Today
    • Join Our Mailing List
  • Morison Global

July 15, 2021

Cryptocurrency donations: Will your nonprofit accept them?

Cryptocurrency has gone mainstream, and if you’ve been sitting on the fence about accepting donations in virtual currency, it’s time to make a decision. But before your not-for-profit says “yes” to a Bitcoin (or other cryptocurrency) gift, make sure you understand the issues involved — including the risks.

Virtual currency = risk

Cryptocurrency refers to a decentralized form of digital currency that’s tracked in a blockchain ledger. Unlike traditional currencies, the ledger doesn’t reside with a central authority, such as a bank or government, but across public peer-to-peer networks. The value of cryptocurrencies derives in part from its scarcity. In the case of Bitcoins, for example, the supply is limited to 21 million “coins.”

One of the most significant risks related to cryptocurrencies is their price volatility. The price for Bitcoin can shift more than 10% in a single day. Imagine a donation that drops that much in value within hours of receipt. Of course, cryptocurrencies also can quickly appreciate in value dramatically. That’s one reason owners might want to donate them — to avoid capital gains tax on the appreciation.

Third-party facilitators can help

Given such price volatility, you need to decide whether your nonprofit can assume the risks. One way to manage them is to accept cryptocurrency through a third-party facilitator, such as The Giving Block, BitPay or Engiven. These platforms allow nonprofits to almost immediately convert crypto donations into dollars — before their value can fall.

Facilitators typically charge a small fee, similar to credit card transaction fees. Check with your financial institution before signing an agreement with a facilitator, though. Some are wary of transactions involving players in the virtual currency industry.

If, on the other hand, you decide to accept cryptocurrency donations directly, and perhaps benefit from appreciation, you must create a “digital wallet” through a bank or mobile phone app. Wallets store the public and private “keys” required to send and receive coins. And you’ll need to implement internal controls and security measures to secure your keys and wallets.

Your reporting obligations

When it comes to reporting, the IRS says nonprofits should treat these obligations as noncash contributions on Form 990 and, if applicable, Schedule M. You must file Schedule M if you receive more than $25,000 in noncash contributions or contributions of art, historical treasures or similar assets, or qualified conservation contributions.

If you accept cryptocurrency directly and convert it to cash within three years after receipt, you must file Form 8282, Donee Information Return, and give the donor a copy. If the donation is worth more than $5,000, your organization will need to sign the donor’s Form 8283, Noncash Charitable Contributions.

Prepare now

If you haven’t yet been approached by a supporter offering a cryptocurrency contribution, it’s only a matter of time. So prepare now. You’ll need new security and compliance policies and should make a gift acceptance policy addendum. Contact us for more information and help.

© 2021


Filed Under: Featured, Not for Profit

Recent News and Posts

Be alert!

2022 tax calendar

Was your US Tax Court session scheduled to be live?

The ABCs of activity-based costing

Are you eligible for the Recovery Rebate Credit?

News and Posts by Category

  • Business
  • Employer
  • ETRA
  • Featured
  • Federal Tax Posts
  • Individual Tax
  • Not for Profit
  • Small Business Tax
  • tax
  • Tax Tips

Items of Interest

Merger Announced!

Morison Global Press Release

Tax Planning Guide

Global Tax Insights

Peer Review Letter

CPA-USA Association

Join Our Mailing List

About Morison Cogen

Morison Cogen LLP is a full-service certified public accounting, tax, and business consulting firm serving private and public companies, not-for-profit organizations, and the personal accounting needs of individuals in the U.S. and around the world....read more

Get Connected

Morison Cogen LLP
484 Norristown Road, Suite 100
Blue Bell, PA 19422

P: 267.440.3000
F: 267.440.3001
E: info@morisoncogen.com

Copyright © 2022 Morison Cogen LLP