Americans continue to be of the most generous groups of people in the world today. With the holiday season approaching and the major disasters both here in the U.S. and in the Philippines, Americans will be even more generous in the days to come.
Before you make your contributions, take a minute to make sure you are not being scammed and your donations are tax deductible. Unfortunately, there are many unscrupulous people using major disasters and the holidays to impersonate charities. These fraudulent charities use the telephone, social media, email, and in-person contacts. So how do you protect yourself and make sure your hard-earned money goes where you intended it to?
- Make sure you are donating to recognized charities. One of the most common scams is to slightly change the name of the organization. For example, the Red Cross becomes The Red Cross or redcross.com instead of the correct redcross.org. Take your time reading the request or looking at the website to make sure you have the true organization before you make a donation. If you aren't sure of the charity, check out the organization on the IRS website using their search feature, Exempt Organizations Select Check. If you aren't sure the organization is legitimate and it isn't listed on the IRS website, consider donating to a similar organization that is.
- Many reputable organizations now allow donations through third party networks helping to protect your financial information.
- Never send cash through the mail or make a wire transfer. Instead make your payment by check or any other method that provides additional documentation of the gift.
For gifts of less than $250, the IRS requires you to keep a receipt from the organization that has the date and amount of gift as well as the name and address of the organization receiving the gift. You can also save documentation such as a cancelled check or a bank or credit card statement, your payroll deduction record or cell phone bill if you are using an alternate method of contribution. For cash contributions of $250 or more, you are required to keep both types of documentation.
If you are donating new items to a charity this year, keep your receipts from the purchase and make sure you put the name of the charity and the date you made the donation. If you are cleaning out drawers, closets, cabinets, pantries, and garages and donating your gently used items, make a list of each item and the fair-market value of the item. Make sure you include the date of the donation as well as the name and address of the organization where you donated the items. The IRS does not provide a list of fair-market value, but you can generally determine the value by checking local resale stores and checking their prices on the same or similar items.
While your intention when giving to a charity may not be to reduce your overall taxes, a little planning and forethought can help you lower your taxes while doing something that may help support your favorite cause and helps you feel good.