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Many Americans regularly seek to help those less fortunate than themselves or to support causes in which they believe, by making donations to charitable organizations. Our nation's charitable mindset benefits countless worthy groups, while often lowering the tax bills of the givers. But it also brings out the worst in a few people- and some of them are in more of a taking than a giving mood. How can you determine whether a charity is legitimate? Below is a checklist of items to consider:
Find out whether the organization is tax-exempt. Most legitimate charities have either obtained or applied with the IRS for tax-exempt status under section 501(c)(3) of the tax code. You can check an organization's tax status by visiting websites such as http://apps.irs.gov/app/pub78 or www.guidestar.org. The IRS also provides a searchable database of charitable organizations. http://www.irs.gov/app/pub-78/.
Don't give to organizations you don't know without doing some homework. Instead, ask where you can learn more about them, research the group, and contact them if you decide to give. You also can check with your local better business bureau or your state’s attorney general’s office to find out more about an organization.
For large contributions, use a check or credit card. They're easier to track for tax purposes—and harder for an illegitimate charity to misuse.
If an organization you don't know calls you directly to ask for funds, don't give out your credit card number, Social Security number, or other personal information. Instead, research the organization and, if you decide to make a donation, initiate the call yourself.
Charities should be able to explain how they plant to use your donation, including how much will go directly to the needy and how much will go to the organization's overhead. Some sham organizations funnel most of their donations to overhead such as excessive salaries—and very little to the people they claim to serve. There are public resources such as www.guidestar.org that compile information about the organization’s overhead and other details about how your donation will be used.
Some organizations choose names that are similar to well-known charities in an attempt to mislead donors. Be careful of solicitations by charities that have unfamiliar names or do not have programs in your community.