Today's tough economy has been doubly hard on non-profit organizations that rely on charitable contributions to fund their operations: First, many people are feeling the pinch themselves and have had to cut back on donations they ordinarily would make; and second, because so many people are out of work or otherwise hurting, charities that provide services to low-income families are being swamped just when their funding has been reduced.
If you're able to help others with charitable donations right now, whether it be cash, material goods or volunteering your time, make sure that the organizations are worthy of your support.
Here are a few suggestions for choosing among the millions of alternatives out there:
Bang for your buck. Make sure any non-profit to which you donate is well-run. Ideally the organization applies at least 75 percent of contributions to programs that serve its beneficiaries, as opposed to spending them on salaries, advertising, fund-raising and other administrative expenses, which are sometimes misreported as "program development," "public education" or other euphemisms.
Do your homework. Study the organization's website, annual report and mission statement, and ask for a copy of its IRS Form 990, which details how contributions are spent. Speak to staff members or volunteers, or volunteer there yourself. Or, if you know someone who has used its services, ask for their impressions of the organization's efficiency and helpfulness to clients.
Several online services can help with your research:
- At GuideStar, you can review financial summaries and other data for more than 1.8 million IRS-qualified, tax-exempt organizations. Its basic search engine is free; or you can order more customized research for a fee. The site also features helpful questions to ask and tips for choosing a charity.
- Charity Navigator rates more than 5,500 large charities by financial strength, revenue spent on programs and services and other criteria. Their "Top 10" lists and "Tips and Resources" sections provide helpful evaluation tools. You also can use their evaluation guidelines to formulate your own inquiries for smaller organizations not included in their ratings.
- The American Institute of Philanthropy is a nonprofit charity watchdog and information service whose Charity Rating Guide (available for $3) rates more than 500 major American charities on how they spend donor money on scale of "A" to "F."
- The Better Business Bureau rates whether organizations have met its standards of accountability, including ethical conduct and honest solicitation practices.
Take advantage of tax deductions. If you itemize deductions on your federal taxes, you can deduct money and property contributions to qualified tax-exempt organizations, within IRS guidelines. And, although your time spent volunteering isn't tax-deductible, associated mileage and other expenses may be. The IRS' Tax Information for Contributors website features a search engine for eligible organizations, information on reporting and substantiating charitable deductions and other helpful tips.
Guard against fraud. Unfortunately, some unscrupulous people and organizations will take advantage of your desire to help others -- if you let them. A few tips:
- Be suspicious of telemarketing and email solicitations. When in doubt, hang up or delete the email and contact the organization yourself.
- Be aware that scammers often choose names that are similar to those of legitimate organizations.
- Never give out personal or credit card information unless you initiate the contact.
Donate your time. If you can't afford a cash donation but still want to help, consider donating your time. Numerous organizations can match you up with local charities that suit your interests, including the government's United We Serve site, Network for Good, and Volunteer Match.
A few additional tips:
- Ask if your employer will match a portion of your contributions, and if it allows automatic payroll deductions to charities of your choice.
- As long as you charge a donation to your credit or debit card by December 31, 2010, it will be eligible for a 2010 tax deduction, even if the charge doesn't clear until next year. Also, a check that you mail to a charity is considered delivered on the date you mail it.
- To claim a deduction for cash or property, you must have a receipt -- including for small cash donations. For individual contributions under $250, a cancelled check or credit card statement will do, but for amounts over $250, you need a written statement from the charity. See IRS Publication 526 for details.
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.
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