Charitable Giving: What to Do Before You Donate
Presented by Kris Maksimovich, AIF®, CRPC®:
Making a charitable gift can be a fulfilling experience, but it’s wise to do a little research before you donate. Take the time to learn about the charity to determine whether the nonprofit organization is legitimate and whether its charitable purposes match your intentions. Use the five-step checklist below to guide you through the process.
- Ask the charity for information. Request information from the charity about its mission and goals. Find out how your donation will be used, determine what percentage of it will actually go toward charitable purposes (versus operational costs), and request proof that your contribution is tax deductible. Know that organizations using paid solicitors are required to identify those solicitors and disclose the percentage of your donation that will pay for their compensation.
- Use your state’s resources. Most states require nonprofits that solicit charitable donations within their borders to register with their attorney general. State attorneys general offices are also responsible for investigating fraudulent practices of charitable organizations and other entities posing as legitimate charitable organizations. Visit the website of the National Association of Attorneys General (naag.org) for a list of the state attorneys general and their contact information.
Charities that have established themselves in nonprofit corporate form are also required to maintain a registration file with the state secretary of state. The file should include the charity’s official name and contact information, the names of executive officers and other management personnel, and the organization’s purpose.
- Double-check the charity’s name. When naming a charity as a beneficiary, always double-check the organization’s name to eliminate any ambiguity. The wrong name or a nickname could cause confusion regarding the proper recipient of your donation. Keep in mind that illegitimate organizations often use names that sound similar to those of legitimate charities so that they can take advantage of unsuspecting donors. GuideStar (guidestar.org/Home.aspx) is a helpful resource for finding up-to-date and accurate information on charities.
- Verify the organization’s status. Ask to see the charity’s IRS letter recognizing its tax-exempt status and eligibility to receive tax-deductible donations. Or refer to the IRS’s searchable database of tax-exempt organizations at https://apps.irs.gov/app/eos. You can also call the IRS at 877.829.5500 to verify an organization’s status. Be sure to obtain the charity’s tax ID for future reference.
- Keep complete records. For donations less than $250, a canceled check or credit card statement is generally sufficient for IRS purposes. For larger donations, obtain a properly worded receipt from the charity documenting your donation. Also keep in mind that your tax deduction is reduced by the fair market value of any gift, meal, or other incentive you receive from the charity. As a general rule, do not send cash.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
Kris Maksimovich is a financial advisor located at Global Wealth Advisors 18170 Dallas Parkway, Suite 103, Dallas, TX 75287. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (972) 931-3818 or at firstname.lastname@example.org.
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