Making a charitable gift can be a fulfilling experience, but before you donate, it’s wise to do a little research. Taking the time to learn about a charity can help you 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.
Request information from the charity about its mission and goals. Find out how your donation will be used, determine what percentage goes toward charitable purposes (versus operational costs), and request proof that your contribution is tax deductible. If the organization uses paid solicitors, it is required to identify those solicitors and to disclose the percentage of your donation that will be used for their compensation
Most states require nonprofits that solicit charitable donations to register with the state attorney general. The attorney general’s office is also responsible for investigating fraudulent practices of charitable organizations and other entities posing as legitimate charitable organizations. Visit the National Association of Attorneys General website for a list of the state attorneys general and their contact information.
When naming a charity as a beneficiary, always double-check the organization’s name to eliminate any ambiguity. Using the wrong name or a nickname could confuse the proper recipient. Keep in mind that illegitimate organizations often use names that sound similar to those of legitimate charities to take advantage of unsuspecting donors. GuideStar is a helpful resource for finding information on charities.
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 list of charities in good standing. You can also call the IRS toll-free at 877.829.5500. Be sure to obtain the charity’s tax ID for future reference.
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.
Whether you've been supporting a nonprofit for years or just starting your giving journey, we're here to help you make informed decisions that reflect your values and maximize your impact. Contact us so we can assist you through the process.
Johnathon Opet, CFP® is a financial advisor located at EmVision Capital Advisors, 251 W. Garfield Rd. Suite 155 Aurora, OH 44202. 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 (330) 954-3770 or at info@emvisioncapital.com.
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.