Can a 501(c)(3) Nonprofit Use Venmo for Donations?

Venmo has become a common tool for everyday transactions. Many 501(c)(3) nonprofit organizations are exploring whether this popular platform can be utilized for collecting charitable donations. Understanding Venmo’s capabilities and limitations for philanthropic purposes is important for organizations seeking to diversify their fundraising efforts and engage a broader donor base.

Eligibility for Nonprofits to Use Venmo

501(c)(3) nonprofit organizations can use Venmo to accept donations. Venmo offers specialized options for businesses and organizations, including dedicated charity profiles. These profiles are designed to facilitate fundraising and provide specific features relevant to nonprofit operations.

To establish a charity profile, a 501(c)(3) organization needs to be verified through PayPal, Venmo’s parent company, which confirms its charitable status. This verification process often grants access to a blue checkmark badge on the Venmo profile, signaling legitimacy and building trust with potential donors.

Establishing a Venmo Business Account

To accept donations, a 501(c)(3) organization must establish a Venmo business account. Users can initiate the creation of a charity profile. This process requires providing organizational details and documentation to ensure proper verification.

Necessary information includes the organization’s legal name, a U.S. mailing address, a business email address, and phone number. For tax reporting purposes, the organization’s Employer Identification Number (EIN) is generally preferred, although a Social Security Number (SSN) may be used for sole proprietors if an EIN is not available. Organizations also need to link a dedicated business bank account by providing routing and account numbers, which facilitates the transfer of received funds. A government-issued identification, such as a driver’s license, is also required for identity verification during the setup process.

For 501(c)(3) organizations, setting up a Venmo charity profile is often initiated through their PayPal business account, where their charitable status must first be confirmed. This integration with PayPal streamlines the verification of the nonprofit’s tax-exempt status. Once the charity profile is created, the organization can customize it with a profile name, description, and relevant category to help donors easily find and identify the cause.

Processing Donations and Payments

Once a 501(c)(3) organization establishes its Venmo charity profile, receiving donations becomes a straightforward process for donors. Donors can easily send funds to the nonprofit’s profile using various methods, including scanning a unique QR code, searching for the organization’s Venmo username, or utilizing payment links provided by the nonprofit. These options enhance convenience for supporters, allowing them to contribute quickly from their mobile devices.

When a donation is made, the funds are initially deposited into the nonprofit’s Venmo balance. The organization can then transfer these funds to its linked bank account. Standard transfers to a bank account are typically free and process within one to three business days, while instant transfers are available for an additional fee, often around 1.75% of the transferred amount, with a minimum and maximum cap. For each donation received through its charity profile, the nonprofit is typically charged a transaction fee, often around 1.9% plus $0.10 per transaction. This fee is automatically deducted from the payment total before the funds are credited to the nonprofit’s Venmo balance.

Accounting and Tax Reporting

Nonprofit organizations using Venmo for donations must integrate these transactions into their overall accounting records to ensure accuracy and compliance. All funds received through Venmo, after any applicable transaction fees, should be properly categorized as contribution income within the organization’s financial statements. Maintaining detailed internal records of each Venmo donation, including the transaction ID, donor name (if available), and amount, is important for reconciliation and audit purposes.

For tax reporting, 501(c)(3) organizations are generally required to file Form 990 with the IRS annually, which includes reporting all sources of income. For the 2024 calendar year, Venmo is required to report payment transactions for goods and services sold that exceed $5,000, irrespective of the number of transactions, by issuing Form 1099-K. While donations are not considered “goods and services sold,” organizations should be aware of these reporting thresholds for their overall financial activity.

Nonprofits also have specific obligations for providing donation receipts to donors for tax deduction purposes. For any single monetary contribution of $250 or more, the IRS requires a contemporaneous written acknowledgment from the charitable organization. This acknowledgment must state the amount of the cash contribution and whether the organization provided any goods or services in exchange for the donation. While Venmo issues a transaction receipt, this receipt may not contain all the specific information required by the IRS for tax deductibility. Therefore, the nonprofit remains responsible for issuing a separate, comprehensive written acknowledgment to donors for contributions of $250 or more that includes all necessary IRS-mandated details.