How to Checkup on Charities

Jun 16, 2014 ​

Charitable donations. Donating to charity.

There’s a lot of competition for your charitable donations. Before you start writing checks, do some homework. While most charities are honest and accountable to their donors, some are not.

The following pointers from the American Institute of Philanthropy will help you make wise choices when giving to charity:

Know your charity.
If you don’t know anything about it, ask for written literature and a copy of the latest annual report. Charities have an obligation to provide detailed information to interested donors.

Find out where your money goes.
Ask how much of your dollar goes for general administration and fundraising expenses vs. how much goes for actual program services. Experts recommend that less than 40% should be spent on general administration and fund-raising costs.

Don’t give in to pressure.
If you’re asked to contribute on the spot, that’s a red flag. Ask for additional information in writing. No legitimate organization will pressure you to give immediately.

Keep good records.
Never give cash, and don’t give your credit card number to a solicitor you don’t know. Once you’ve checked out the charity, write a check or money order so you have a record for tax purposes. The Internal Revenue Service requires a receipt — a cancelled check won’t do — for all tax-deductible contributions of $250 or more.

Don’t confuse tax-exempt with tax-deductible.
Not all charities that ask for donations are eligible to receive tax-deductible contributions. If the organization is tax-exempt, that means it doesn’t have to pay taxes. Tax-deductible, on the other hand, means you can deduct the amount of your contribution on your federal tax return if you itemize your taxes.

Watch for charity look-alikes.
Some questionable charities choose a name similar to a well-known organization to try to trick you into thinking it’s legitimate. Check out each charity before you make a contribution.

Don’t give in to emotional appeals.
Question any charity that relies on sob stories or hard-luck appeals -- particularly if it’s a phone or direct mail appeal -- with only vague explanations for how it spends your charitable dollars.

Don’t feel obligated by gifts.
Those address labels, greeting cards, and calendars add to administrative costs. They’re sent to increase donations, but you’re not bound to make a donation to keep the gift. In fact, it’s against the law for the charity -- or any organization -- to demand payment for any unordered merchandise.

These websites can help you analyze charities:

  • - The Better Business Bureau’s Wise Giving Alliance offers a free analysis.
  • - This independent site rates more than 5,000 nonprofits on financial efficiency.
  • - The American Institute of Philanthropy offers tips on online giving.
  • - The Evangelical Council for Financial Accountability has information about more than 1,200 Christian charity groups.
  • - This site offers information about recent nonprofit tax filings.

Finally, make sure your donations match the amount you’ve allocated within your overall spending plan. Remember that solicitations during the holidays are timed to tug at your heartstrings, so keep a vigilant eye on your budget. Then give generously -- once you’re satisfied that the charity is worthwhile.

Source: Credit Union National Association

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